PRINCIPLES 

OF 

FOREIGN   TRADE 


By 


NORBERT  SAVAY,   M.A.,  LL.B. 

Member  of  the  New  York  Bar ;   Formerly   Special  Lecturer  on 

Foreign   Trade,   Notre   Dame  University;   Formerly   Counsel   for 

Russian  Consulate  General. 


THE  RONALD  PRESS  COMPANY 
NEW  YORK 


9 1 S  3 


Copyright,  191 9,  by 
The  Ronald  Press  Company 


♦.•  N  :  •  •  • 


o 


This  book  is  respectfully  dedicated  to 
The  Chairman  and  Members  of  The 
National  Foreign  Trade  Council 
and  to  The  Officers  and  Members  of 
The  American  Manufacturers  Ex- 
port Association  in  recognition  of 
the  admirable  work  done  by  both 
these  organizations  in  promoting  our 
foreign  trade. 


PREFACE 

Assuming  that  an  educational  book  is  authoritative  and  that 

V      its  author  by  training,  experience,  and  study  is  quaHfied  to  in- 

J      struct  or  is  entitled  to  express  his  opinions,  the  value  of  the 

book  then  depends  upon  its  timeliness  and  the  thoroughness 

with  which  it  discusses  or  teaches  the  particular  subject  matter. 

Regarding  the  timeliness  of  this  book,  little  need  be  said. 

The  growing  interest  in  foreign  trade  among  even  the  smaller 

manufacturers  and  producers  of  the  United  States  is  largely 

,.      the  natural  effect  of  two  causes:  first,  the  unprecedented  de- 

^     mands  of  the  war  which  led  to  an  increase  of  facilities  to  fill 

^      these  demands ;  and  second,  now  that  the  war  is  over,  the  neces- 

sity  of  finding  outlets  for  the  increased  production  brought 

about  by  the  creation  of  these  facilities. 

The  author  recognizes  the  possibility  of  the  criticism  that 
much  of  his  advice  on  the  conduct  of  foreign  trade  is  too 
^  .  "ideal"  in  its  tone,  and  that  to  carry  out  all  the  plans  and  sug- 
gestions in  the  ideal  way  outlined  here  is  impracticable  for  the 
business  with  limited  resources.     This  is  perfectly  true.     In 
the  smaller  business,  the  "rule  of  thumb"  method  must  of 
.^  necessity  obtain  and  the  existing  mechanism  be  expanded  with 
r   but  little  special  preparation  to  embrace  the  foreign  exploita- 
tion.    Nevertheless,  it  is  always  well  to  have  a  model,  accord- 
ing to  which  action  should  be  adjusted  as  nearly  as  possible. 
It  may  also  be  said  that  the  aim  of  the  book  is  not  primarily 
to  teach  the  exporter  how  to  sell  abroad  his  particular  goods. 
This  he  can  readily  learn  after  he  has  mastered  the  general 
principles  and  grasped  the  mechanism  of  the  subject,  adopting 
so  far  as  applicable  the  same  methods  abroad  that  have  proved 
successful  at  home. 


VI 


PREFACE 


The  primary  aim  of  the  book  is  to  set  forth  those  general 
principles  which  unclerhe  the  building  up  of  foreign  trade, 
not  merely  of  such  trade  as  is  a  convenient  outlet  for  a  few 
superfluous  home  products,  but  as  a  part  of  a  permanent  and 
national  foreign  trade  policy.  It  should  not  be  understood 
from  this  that  practical  details  are  entirely  omitted. 

The  volume  is  not  a  "how  book,"  but  nevertheless  a  con- 
siderable portion  of  it  is  devoted  to  a  description  of  the  mecha- 
nism used  in  the  handling  of  imports  and  exports.  Every  care 
has  been  taken  to  indicate  the  source  whence  the  informa- 
tion which  the  exporter  is  likely  to  require  may  be  derived. 
Given  this  information  and  also  knowledge  of  the  essential 
mechanism  and  of  fundamental  principles,  the  exporter  is  then 
equipped  to  make  profitable  use  abroad  of  the  executive  and 
sales  ability  which  has  brought  him  success  at  home. 

There  Is  no  mystery  and  little  intricacy  attached  to  the 
methods  of  foreign  trade  development.  Human  nature  is 
much  the  same  the  world  over.  Human  needs  can  be  devel- 
oped anywhere  by  sound  salesmanship  and  proper  advertising. 
The  Chinese  can  as  readily  be  "educated"  to  the  advantages  of 
cash  registers  as  the  Japanese  to  the  superiority  of  the  auto- 
matic screw  machine ;  and  doubtless  many  a  perspiring  Hotten- 
tot swears  by  the  special  features  of  American  agricultural 
machinery  when  he  becomes  acquainted  with  the  ease  and 
comfort  of  a  National  Harvester  "sitting"  plow.  The  biggest 
exporting  firms  in  the  world  are  the  pre-eminently  successful 
American  concerns.  Distinctive  American  goods,  from  raw 
steel  to  typewriters,  are  sold  the  world  over  by  distinctively 
American  selling  methods. 

Methods,  of  course,  must  when  necessary  be  adapted  to 
idiosyncrasy  and  circumstance.  But  given  a  knowledge  of, 
or  the  right  point  of  view  on,  the  fundamental  matters  dis- 
cussed in  this  book,  there  should  then  be  no  difficulty  in  adapt- 
ing" means  to  the  ends  desired.     Possibly  the  point  of  view 


PREFACE  vii 

or  the  opinion  of  the  author  will  not  always  coincide  with  that 
of  the  reader.  If  so,  all  that  the  writer  can  state  is  that  his 
opinion  has  been  formed  after  fifteen  years  of  experience  as 
an  international  salesman  and  sales  investigator  and  as  counsel 
for  consulates  and  international  traders. 

The  author  wishes  to  express  his  warm  appreciation  of  the 
many  suggestions  and  criticisms  which  have  helped  so  materi- 
ally in  the  preparation  of  the  present  volume.  He  especially 
wishes  to  extend  his  thanks  to  Frank  G.  Conway  of  Street  and 
Finney;  Frederick  Nash  of  the  General  Chemical  Company; 
Alba  B.  Johnson,  formerly  with  the  Baldwin  Locomotive 
Works;  James  H.  Carter  of  the  National  City  Bank;  Harry 
A.  Wheeler,  President  of  United  States  Chamber  of  Com- 
merce; and  to  the  Guaranty  Trust  Company  and  the  Discount 
Corporation,  both  of  New  York  City. 

In  conclusion,  it  may  not  be  improper  to  observe  that 
nations  as  well  as  individuals  need  special  knowledge  in  order 
to  gain  and  retain  foreign  trade.  If  America  is  to  retain  even 
her  relative  position  in  international  commerce  she  must 
continually  add  to  her  present  knowledge  of  foreign  trade,  and 
to  the  methods  by  which  it  is  conducted.  The  author  hopes 
that  in  some  small  measure  this  volume  may  contribute  to 
this  end. 

NORBERT  SaVAY. 

New  York  City, 
May  8,  19 19. 


CONTENTS 


Part  I — General  Considerations 
Chapter  Page 

I     The  Opportunities  of  Foreign  Trade    ....         3 
Advantages  of  Foreign  Trade 
Requisites  to   Success 
Foreign  Trade  as  a  Career 
Foreign  Trade  and  National  Welfare 
The  New  Spirit  of  Foreign  Trade 

II     Six  Fundamentals  of  Foreign  Trade    ....         8 
Fundamental  Factors 
Capital 
Information 

Method  of  Distribution 
Organization 
The  Terms  of  Sale 
Miscellaneous   Export  Policies 

III  Foreign  Trade  Strategy  and  Its  Essentials   .      .       15 

Strategy  in   Foreign  Trade 

Definite  Study  Essential 

The  Collection  of  Information 

Investigation  on  the  Spot 

What  May  Be  Learned  at  Home 

Study  of  the  Psychology  and  the  Structure  of  the 

Market 
Charting  the  Results  of  Investigation 
The  Formulation  of  Plans 
Recapitulation 

IV  Sources  of  Foreign  Trade  Information     ...       23 

Statistical  Information 
Defects   of    Governmental   Statistics 
Miscellaneous  Sources  of  Information 
Consular   Information 
Trade  Discussions 
Governmental  Trade   Investigation 
Trade    Representatives'    Investigations 
Miscellaneous  Printed  Alatter 
Original   Information 
ix 


X  CONTENTS 

Chapter  Page 

V    Demand  and  Supply  in  the  Foreign  Market  .     .       29 
The  Principles  of  Demand 
Tests  of  Demand 
Quantitative  Tests 
Qualitative  Tests 
Potential   Demand 
How  to  Study  Demand 
The  Relation  of  Demand  and  Supply 
Tests  of  Supply- 
Overproduction 
Domestic  Supply 
Foreign  Supply 
Price  and  Quality 
Conclusion 

VI     The  Psychology  of  the  Foreign  Market  ...       39 

Basic  Principles 

Commodities    Pay    for    Commodities 

Commerce     Rests    Upon     Comparative     Needs    and 

Supplies 
Conditions  of  Society  Determine  Status  of  Market 
Structure  of  the  Market 
Psychology  of  the  Market 
Reciprocity  Significant 
Civilizing  Influences  of  International  Trade 

VII     The  Status  of  the  Foreign  Market      ....       46 
Knowledge  of  General  Conditions 
The  Political  Status 
The  Governmental  Status 
The  Legal  Status 
The  Economic  Status 
The  Financial  Status 
The  Social  Status 
The  Commercial  Status 

VIII     Principles  of  International  Distribution      .      .       54 
Factors  of  Distribution 
Distribution  and  Trade   Channels 
Intermediaries  in  Foreign  Trade 
Fixing  the   Price 
Comparative  Costs 
Dumping 

Distribution  and  Credit 
Distribution  and   Prices 

Maximum  and   Minimum  Efforts  in  Distribution 
Mistaken  Methods  of  Distribution 
Acquaintance  an  Element  in  Distribution 

J 


CONTENTS  xi 

Chapter  Page 

IX     The  Best  Markets  for  the  American  Exporter  .       64 
Trade  Centers 
London 
Paris 

"New"  Markets 
China 
Russia 

Latin  America 
Special  Lines  of  Effort 
General  Conclusions 

X     The  Commercial  Policies  OF  World  Powers   .      .       70 
The  Development   of   Economic  Thought 
The  Ancient  World 
Mercantilism 

Eighteenth    Century  Laissez-Faire 
Nineteenth    Century  Protectionism 
Special   Policies   of   World   Powers 
Protective  Tariff  Systems 
Navigation  Laws 

Devices  for  Promoting  Foreign  Trade 
General  Policies  of  World  Powers 
United  States 
Great  Britain 
Germany 
France 

Other  Nations 
Knowledge  of   Special  Trade  Policies 

XI     Looking  into  the  Future  of  Foreign  Trade  .      .       80 
What  of  the  Future? 
The   Individualistic  Nations 
Higher   Standards  of  Living  _ 
The  Breaking  Down  of  Barriers 
The  Present  Economic  Situation 
Government   Aid  to  Trade  Expansion 
Sociological  Aspects 

Part  II— Machinery  of  Foreign  Trade 

XII     The  Exporter  and  His  Staff 89 

World  Trade  Machinery 

The  Exporter 

Classes  of  Exporters 
The  Producer  for  Export 
The  Export  Commission  House 


xii  CONTENTS 

Chapter  Page 

The  Commission   House   as   Buying  Agent 
The  Export   Merchant 
The  Export   Agent 
Co-operative  Export  Organizations 

The  Exporter's  Staff 

The  Export  Manager 

The  Director  of   Foreign  Sales  > 

The  Foreign  Trade  Manager 

The  Manufacturer's  Export  Representative 

The  Correspondent 

Translators 

The  Co-operative   Salesman 

Local  Selling  Agent 

The  Shipping  Clerk 

The  Traffic  Manager 

Advertising  Expert 

XIII     Importing  and  the  Importer loi 

Interrelation  of  Exports  and  Imports 

The  Utility  of  Imports 

International    Exchange  of   Commodities 

Dividing  Lines — Legal   and  Economic 

The  Importer  and  His  Staff 

The  Importer  Proper 

The  Importer  Improperly   So-Called 

Local  Commission  Houses 

Local  Wholesale  Distributer  or  Jobber 

The  Importer  for  Retail 

The  Exporter-Importer 

The  Co-operative   Importer 

The  Resident  Buyer 

The  Importing  Manufacturer 

Custom  House  Broker 

Warehouse 

Drawback  Broker  or  Specialist 

Methods  of  Importation 

XIV    Chief  Factors  in  the  Machinery    .....     ill 
Sources  of  Information 
Foreign  Trade  Publications 
Insurance  and  Freight  Rates 
Parcel  Post  and  Express 
Banks  and  Collections 
Forwarding  Agents 
Foreign   Exchange   Broker 
The  Investigator 
Foreign  Trade  Specialists 


CONTENTS 


Xlll 


Chapter  Page 

XV    The  Foreign  Trade  Machinery  of  the  United 

States  Government Ii6 

The   Governmental    Machinery 
Machinery   of   the   State   Department 
The  Diplomatic  Service 
The  Consular   Service 
The  Office  of  Foreign  Trade  Advisers 
Machinery  of  the  Department  of  Commerce 
Other    Governmental    Factors 
The  Shipping   Board 
The  Federal  Trade   Commission 
United   States   Tariff   Commission 
Co-ordinating  Committee   on   Foreign  Trade 
Federal  Reserve  Bank 

Functions    and    Operation    of    the   Federal    Reserve 
Bank 


XVI     Foreign    Trade    Organizations    in    the   United 
States   

Public  Organizations 

National  Organizations 

Local  Organizations 

The  International  Organizations 

Private  Organizations 


128 


XVII    The  Value  of  Co-operation  in  Foreign  Trade 
The  American  Trust 
Industrial  Combinations 
Combinations  Abroad 
Possibilities  of  Co-operation 
Co-operation   Without   Combination 
Possibilities  of  the  Future 


133 


XVIII    The  Webe-Pomerene  Law 

Enactment   of   the  Webb-Pomerene  Law 

General  Provisions  of  the  Law 

Methods  of  Control 

Forms  of   Combination 

Wide  Range  of  Possibilities 

The  Law  Designed  to  Aid  Foreign  Trade 

Advantages  of  the  Law 

XIX    Export  Organizations  and  Combinations 
Growth  of   Foreign  Sales  Combines 
Specialty  Foreign  Sales 
Staple  Foreign  Sales 


139 


.      148 


xiv  CONTENTS 

Chapter  Page 

Types  of  Sales  Organizations 
Jointly  Controlled  Selling  Organization 
Typical  Plan  of  Jointly  Controlled  Selling  Organi- 
zation 
Co-operative   Sales  Organization 
Examples  of  Co-operative  Sales  Organization 
The  Selling  Combine 
Example  of  Selling  Combine 
Form  of  Incorporation 
Agreements  with  Participating  Concern 
Suggested  District  Sales  Company 

XX       GOVERNMENTAI      SuPPORT    OF    FoREIGN     TrADE     .        .       l6l 

An  Achievement  in  Foreign  Trade 

Basic  American  Organization 

Need  of  Governmental   Help  in  Foreign  Trade 

Form  of  Organization 

An  American  Board  of  Foreign  Trade 

Specific  Activities  of  Board  of  Trade 

Importance  of  Proper  Organization 

General  Functions  of  the  Board 

Part  III — Operating  a  Foreign  Trade  Organization 

XXI     The  Development  of  a   Foreign   Market     .     .     171 

Attitude  Toward  .the  Foreign  Field 
Developing  a  Foreign  Market 
The  Investigator 
Investigation  Procedure 
Letters  of  Introduction 
Deportment 
Obtaining  Data 
Time 

Expense  of  an  Investigator  or  a  Sales  Representative 
Export  Office 
•         Expenses  and  Returns 
Co-operation 
Self-Developing  Foreign  Trade 

XXII     Preparing  a  Foreign  Sales  Plan 181 

The  Sales  Plan 

Information   Required 

Correlation  of  Selling  Plan  and  Selling  Organization 

Elasticity  of  Selling  Plan 

Special  Selling  Plans 

Local  Sources  of  Information 

Concentration 


Chapter 


CONTENTS 


Follow-Up  Methods 
Advertising  as  a  Follow-Up 
Closing  Sales  by  Mail 
Co-operation  in  Foreign  Sales 
The  International  Sales  Manager 


XV 

Page 


XXIII     Selecting  Men  for  Foreign   Service 
The  Elements  of  Success 
Aptitude  and  Adaptability 
Special  Knowledge  and  Training 
Personality 

The  Right  Man  for  the  Right  Field 
Selecting  the  Man 
Age  and  Experience 
Tests  of  Candidates 


•  • 


192 


XXIV    Education  for  Foreign  Trade 200 

Requisites  for  Salesmanship  Success 
European  Methods 
Technical  Education 
Practical  Education 
American  Education  in  Foreign  Trade 
Status  of  American  Education  in  Foreign  Trade 
Practical  Training  for  Foreign  Trade 
Natural   Qualifications  Required   in   Foreign  Trade 
Haphazard  Training   for  Foreign  Trade 
Why  We  Have  Few  Salesmen  Qualified  for  Foreign 
Trade 


XXV    Education  for  Foreign  Trade  (Continued) 
The  Export  Office  as  a  Training  School 
The  Scl-ool  and  Shop  Method 
Opportunities  for  Study  of  Foreign  Trade 
A  Practical  Course  in  Foreign  Trade 
Practical  Experience  in  Foreign  Trade 


210 


XXVI    The  Efficiency  of  the  Organization 

Fundamental  Efficiency  Principles 

Organization 

Specialized  Effort 

Formulation  of  General  Policies 

Handling  Salesmen 

The  Manager's   Duty — Inspiration 

Liberal  and  Fair  Treatment 

Keeping  in  Touch 


218 


XVI 


CONTENTS 


Chapter 
XXVII 


XXVIII 


XXIX 


Selling  Methods  in  Foreign  Trade    . 
Adaptability  of  Selling  Methods 
Selling  Methods   Must  Conform  to  Custom 
Suiting  Methods  to  Conditions 
The  Leisurely  Approach 
Methods  for  Promoting  Foreign  Trade 
Competitors'  Methods 

Suggestions  for  International  Salesmen 
The  International  Salesman 
Aggressive  Salesmanship 
Overcoming  Customers'  Excuses 
Offering  Suggestions 
Keeping  a  Customer 
Approaching  a  Prospect 
Closing  a  Sale 
What  is  Meant  by  Salesmanship  as  an  Art? 


Page 
225 


232 


Foreign  Trade  by  Mail  Order    . 
Status  of  Foreign  Mail  Order  Trade 
The  Ordinary  Type   of   Mail   Order  House 
The  Dealer  and  the  Mail  Order  House 
Mail  Order  Advertising 
Good  Service 
Credits 
The  Local  Representative 


241 


XXX     Advertising  in  Foreign  Trade 

Purpose   of   Advertising 

Adapting  the  Advertisement  to  Conditions 

Channels  for  Foreign  Trade  Advertising 

Value  of  Advertising  Mediums 

Advertising  Specialists 

Circularizing 

Local  Advertising  Agencies 

Exhibits 

Posters 

Information   as   an   Advertising   Basis 

Preparation  for  Foreign  Advertising 

Part  IV — The  Technique  of  Foreign  Trade 


247 


XXXI     The  Technicalities  of  Importing    . 

Interrelation  of  Foreign  Trade  Machinery 
Classes  of  Importers 
Custom  House  Procedure 
Foreign  Preliminaries 


250 


CONTENTS 


xvii 


Chapter 


XXXII 


Page 


Domestic  Procedure 
Forms  of  Entry  Blanks 
Storing  and  Bonding 
Undervaluation 

Manufacturing     for     Export    .    . 
Meeting  the  Customer's  Demands 
The  American  Manufacturing  System 
Manufacturing  Details 
Latent  Demand 

Production  and  Local  Methods 
Price  and  Quality 
Conclusion 


267 


XXXIII 


XXXIV 


XXXV 


XXXVI 


From  Factory  to  Seaport 

The  Technicalities  of  Exporting 

Packing 

General  Conditions  to  be  Considered  in  Packing 

Special  Conditions  to  be  Considered  in  Packing 

General  Instructions  for  Packing 

Marking 

Railroad  Transportation  of  Exports 

Transfer  at  the  Port  of  Shipment 

Shipping  Arrangements  at  the  Port    .... 
What  the  Shipping  Arrangements   Include 
Choosing  the  Steamship  Company 
Rates 

Regulations   Pertaining  to  the  Handling  of  Freight 
Shipping  Permit 

The  Bill  of  Lading — Export  Invoice 
Consular  Requirements 


273 


280 


Custom  House  Procedure 

Shipper's  Export  Declaration 

Shipping  Through  an  Agent 

Shipments  from  the  Interior 

Clearance 

Drawback 

Shipping  in  Bond 

The  Principles  and  Laws  of  Marine  Insurance 
Marine  Insurance 
The  Origin  of  Marine  Insurance 
Fundamental  Regulations 
The  Agents 
Important  Features  of  Marine  Insurance 


286 


291 


XVlll 

Chapter 


XXXVII 


XXXVIII 


CONTENTS 


Liability  of  Steamship  Companies 
Abandonment 
Settlements  of  Averages 
Valued  and  Open  Policies 

Financing  Foreign  Shipments  , 
Methods  of  Export  Payment 
Cash  With  Order 
Bank  Credit 
Open  Accounts 
Bills  of  Exchange 
Negotiable  Instruments 
Trade  Acceptance 
The  Use  of  Trade  Acceptances 
Documentary  Drafts 
Bank  Acceptance 
Financing  the  Import  Shipment 


Foreign  Credits  and  Collections 

Credit  Customs 

Credit  Information 

Discounting  Drafts 

International  Banking 

Effect  of  Federal  Reserve  Act 

Trust  Receipts 

Finance  Bills 


Page 


299 


310 


316 


XXXIX     Foreign      Commerce     Laws 

Necessary  for  an  Elementary  Knowledge 

The  Commercial  Codes 

Registration 

Miscellaneous  Provisions 

Bankruptcy  Laws 

Compulsory  Bookkeeping 

General  Governmental  Supervision 

Commercial  Paper 

Peculiar  Trade  Customs 

Commercial  Travelers 

Law  of  Agency 

Sources  of  Information 

XL     Summary  of  Trade-Mark,  Patent,  and  Tariff 

Laws 326 

A   Knowledge    of   Trade-Mark   Laws    Essential   in 

Foreign  Trade 
Classes  of  Trade-Mark  Laws 
Regulations  of  the  International  Convention 


CONTENTS 


Chapter 


XIX 

Page 


Registration 

What  May  Not  be  Registered 

Rules  Regarding  Registration 

Patent  Laws 

Tariff  Laws 

Part  V — Trade  Regulations 

XLI     Commercial    Travelers 337 

Knowledge    of     Regulations    Indispensable    to    the 

Exporter 
License  Fees  and  Taxes 

Recent  Treaties  with  South  American  Countries 
Documents  Required 
Admission  and  Sale  of  Samples 
Other  Important  Factors 
New  Republics  and  Enemy  Countries 
Regulations  in  Individual  Countries 


XLII     Commercial  Travelers   (Continued) 
Regulations  in  Individual  Countries 


366 


XLIII    Consular  and  Shipping  Requirements  in  World 

Trade       390 

Requirements  in  Individual  Countries 

XLIV    Credit  Customs  of  the  World 404 

Customs  of  Individual  Countries 


Appendix 

Appendix  A — Governmental  Enactments  and  Agencies  .     .     417 
Text  of  the  Webb-Pomerene  Law 
Law  of  Drawback 
Federal  Reserve  Act 

Work  of  the  Bureau  of  Foreign  and  Domestic  Commerce 
Work  of  the  Office  of  Foreign  Trade  Advisers 
Federal  Trade  Commission — Rules  of  Practice 

Appendix  B — Diplomatic     Representation,     Parcel     Post 

Countries,    and    Shipping    Distances 438 

Foreign  Cities  in  Which  There  Are  American  Consulates 
Embassies  and  Legations  Maintained  Abroad  by  the  United  States 
Parcel  Post  Countries 
Distances  from  New  York  to  Principal  Ports  of  the  World 


XX  CONTENTS 

Page 
Appendix  C — Currency  and  Weight  Equivalents  ....     447 
Foreign  Currency  Equivalents 
Values  of  Foreign  Coins 
Conversion  Tables 

Appendix  D — Suggestive   Investigation    Charts     ....     453 
Investigator's   Instruction   Sheets 
Investigator's     Analysis  Sheet 
Investigator's  Summary  of  Analysis  Sheet 
Supplementary  Topics  for  Investigation 

Appendix  E — Bibliography 463 

Appendix  F — Glossary 4^5 


Principles  of  Foreign  Trade 


PART    I 
GENERAL    CONSIDERATIONS 


CHAPTER   I 

THE  OPPORTUNITIES  OF  FOREIGN  TRADE 

Advantages  of  Foreign  Trade 

Why  should  any  American  manufacturer  or  producer,  who 
has  a  satisfactory  business  at  home,  enter  the  foreign  field? 
Even  when  he  is  convinced  that  foreign  trade  would  be  advan- 
tageous, how  shall  he  set  about  it  and  how  can  he  avoid  the 
obstacles  and  overcome  the  handicaps  that  confront  the  stran- 
ger in  a  strange  land  ?  These  questions  this  book  purposes  to 
answer. 

Foreign  trade  offers  to  the  American  producer  an  oppor- 
tunity for  greater  profit,  for  greater  independence,  and  for 
greater  service.  The  exporter  who  discovers  and  develops  a 
new  market  is  as  much  a  creator  of  wealth  for  himself  and  his 
country  as  is  the  miner  or  the  farmer.  Nor  do  the  advantages 
cease  with  his  increased  income.  His  foreign  trade  will  tend 
to  make  him  independent  of  domestic  conditions.  He  can 
weather  a  period  of  national  financial  depression  without 
reducing  his  force  or  curtailing  his  output.  High  wages  may 
continue  and  the  cost  of  doing  business  may  rise,  but  his 
increased  production  to  meet  his  foreign  orders  will  keep  down 
the  cost  price  of  his  goods.  Here  he  will  find  a  profitable 
use  for  the  new  factories  and  machinery  bequeathed  him  by 
the  war.  Here  is  employment  for  his  surplus  labor  and  here 
are  real  careers  for  those  of  his  employees  who  can  qualify. 
Finally  if  he  will  properly  equip  himself,  he  will  be  in  a  posi- 
tion to  grasp  the  greatest  opportunity  that  has  ever  been 
offered  the  American  trader. 

Now,  if  ever,  is  the  time  to  establish  overseas  a  permanent 

3 


4  GENERAL   CONSIDERATIONS 

market  for  American  goods  and  to  lay  the  foundations  of  a 
trade  that  will  give  the  United  States  the  place  among  the 
world's  exporting  nations  to  which  it  is  entitled  by  reason  of 
its  size  and  resources.  The  shelves  of  the  world  are  empty.  It 
will  be  years  before  the  nations  of  Europe  will  be  able  to  pro- 
vide for  more  than  their  own  needs.  It  should  be  possible  for 
this  country,  if  its  business  men  utilize  their  opportunity,  not 
only  to  maintain  the  remarkable  trade  it  has  gained  during  the 
war,  but  still  further  to  develop  and  stabilize  this  avenue  of 
industry.  Such  a  development  would  vastly  increase  the 
national  wealth.  The  task  for  a  few  years  to  come  will  be 
comparatively  easy,  though  sooner  or  later  the  American  ex- 
porter will  find  himself  in  competition  with  the  world's  best 
international  traders.  Only  if  he  will  properly  equip  himself 
can  he  then  hold  the  position  he  has  gained. 

Requisites  to  Success 

The  price  of  success  in  the  foreign  field  is  most  careful  and 
constructive  preparation.  Foreign  trade  is  not  adapted  to  get- 
rich-quick  methods.  It  has  a  technique  of  its  own  which  must 
be  mastered.  The  trader  must  study  his  market.  He  must 
build  for  the  future.  He  must  not  treat  his  foreign  depart- 
ment as  a  dumping  ground  for  what  he  cannot  easily  dispose 
of  at  home.  He  must  seek  business  intelligently,  for  no  longer 
does  foreign  trade  come  unsolicited.  He  must  be  ready  to 
make  a  substantial  investment  of  time,  money,  and  energy. 
The  results  will  amply  justify  the  expenditure. 

One  of  the  American  trader's  chief  requisites  for  success 
is  knowledge — specialized,  expert  knowledge.  He  needs  no 
less  the  establishment  of  direct  selling  facilities,  only  possible 
to  the  average  trader  through  co-operative  effort.  Above  all 
he  needs  the  support  of  a  strong,  aggressive,  organized,  and 
continued  efi:ort  for  the  sale  of  American  goods  abroad  and 
for  the  protection  of  commercial  integrity  in  foreign  lands. 


OPPORTUNITIES   OF   FOREIGN   TRADE  5 

When  to  these  requisites  is  added  a  proper  individual  equip- 
ment, the  road  to  success  is  open. 

Foreign  Trade  as  a  Career 

It  is  not  only  to  the  capitalist  and  the  established  producer 
that  foreign  trade  presents  its  opportunities.  To  the  young 
man  with  health  and  ambition,  energy  and  intelligence,  if  he  is 
foot-loose,  if  he  has  imagination,  and  above  all,  if  he  is  touched 
by  the  spirit  of  adventure,  it  offers  a  career  whose  attractions 
are  strong.  The  spirit  which  may  have  lured  his  grandfather 
to  ship  before  the  mast,  or  his  father  to  forsake  the  village 
store  for  the  life  of  the  commercial  traveler,  beckons  him  to 
a  greater  opportunity  than  they  ever  dreamed  of.  It  is  not 
merely  a  chance  to  see  the  world  and  to  earn  a  good  living,  but 
a  call  to  act  as  his  country's  emissary.  The  work  of  extending 
America's  market  is  a  pioneer  work  worthy  of  compari- 
son with  that  of  the  early  pathfinders  who  extended  her 
boundaries. 

The  opportunities  are  not  restricted  to  salesmanship.  Many 
a  successful  salesman  returns  to  the  office  from  which  he 
started,  to  fill  one  of  the  executive  positions  which  are  the  big 
prizes  of  the  calling — big  not  only  in  their  material  rewards 
but  in  the  chance  they  offer  him  to  do  constructive  work  of  a 
high  order  both  for  his  products  and  for  the  welfare  of  his 
country. 

The  positions  in  the  office  of  the  foreign  trader  call  for 
trained  men.  Here  the  habitual  job-hunter  meets  his  Water- 
loo. Mere  willingness  and  general  education  are  not  sufficient. 
Special  training  and  technical  knowledge  are  indispensable. 
Vocational  education  for  foreign  trade  is  one  of  the  great 
needs  of  the  moment.  If  without  such  training  a  young  man 
can  secure  a  foothold  in  an  export  office  he  is  indeed  fortunate. 
If  he  hopes  to  advance  or  even  to  remain,  he  will  at  once  set 
about  the  acquisition  of  the  special  knowledge  that  he  needs. 


6  GENERAL   CONSIDERATIONS 

Here  is  a  vocation  that  is  not  yet  overcrowded.     Here  is  a 
real  future  for  the  man  who  will  do  his  part. 

Foreign  Trade  and  National  Welfare 

Foreign  trade  has  begun  to  be  conscious  of  a  new  spirit. 
The  day  of  the  individualist  is  waning.  The  interests  of  the 
foreign  trader  are  closely  knit  with  those  of  his  native  land 
and  of  the  country  with  which  he  deals,  and  whether  he  is 
conscious  of  it  or  not  his  activities  have  an  important  bearing 
on  their  prosperity  and  welfare.  The  national  advantages  of 
foreign  trade  may  be  summed  up  as  follows: 

1.  Foreign  trade  stimulates  national  progress  and  steadies 

prices. 

2.  It  creates  national  wealth  by  widening  the  circle  of 

exchanges. 

3.  It  brings  about  a  better  adjustment  of  the  creative 

forces  of  the  nation. 

4.  It  disposes  of  surplus  products  and  gives  employment 

to  surplus  labor. 

5.  It  offers  a  new  field  in  which  the  country's  capital  may 

replace  itself  with  profit. 

6.  It  improves  the  distribution  as  well  as  the  production 

of  wealth. 

7.  It  tends  to  reduce  the  cost  of  money  and  it  improves 

the  national  credit. 

In  a  word,  foreign  trade  is  among  the  most  powerful  fac- 
tors in  creating  and  multiplying  the  wealth  of  the  nation. 

The  New  Spirit  of  Foreign  Trade 

It  is  in  the  exporter's  attitude  towards  his  foreign  market 
that  the  new  spirit  is  most  manifest.  He  not  only  regards  him- 
self as  the  custodian  of  his  country's  honor,  but  he  has  begun 
to  build  for  the  future.     He  is  no  longer  satisfied  to  grasp  an 


OPPORTUNITIES    OF    FOREIGN   TRADE  7 

immediate  profit  and  to  seek  pastures  new.  Today  he  is  aim- 
ing to  lay  the  foundations  of  a  permanent  trade.  He  wants 
the  confidence  of  his  market  and  he  is  seeking  to  cultivate  it. 
He  realizes,  finally,  that  the  highest  business  ethics  and  good 
business  policy  are  as  closely  identified  abroad  as  they  are  at 
home. 

The  exporter  who,  while  he  piles  up  his  profits,  thinks  and 
speaks  of  himself  as  a  missionary  who  is  extending  the  fruits 
of  this  country's  civilization  and  who  therefore  should  be  con- 
sidered a  benefactor  of  mankind,  may  evoke  a  smile,  never- 
theless there  is  much  to  be  said  for  his  point  of  view.  It  may 
be  that  he  is  raising  the  standard  of  living  and  of  civilization 
itself  and  is  helping  to  equalize  the  chances  of  all  peoples  in 
the  pursuit  of  happiness.  If  the  exporter  really  believes  in  his 
products  and  is  successful  in  introducing  them  among  people 
who  but  for  him  would  never  know  them,  the  financial  returns 
may  well  be  the  lesser  part  of  what  he  has  brought  about. 

The  new  spirit  of  foreign  trade  is  born  of  a  consciousness 
of  the  opportunity  for  service  and  of  the  responsibility  which 
it  involves.  The  trader  who  seeks  success  today  must  de- 
serve it. 


CHAPTER   II 

SIX  FUNDAMENTALS  OF  FOREIGN  TRADE 

Fundamental  Factors 

There  are  six  factors  in  foreign  trade  which  may  be  consid- 
ered as  fundamental.    They  are: 

1.  Capital 

2.  Information 

3.  Method  of  distribution 

4.  Organization 

5.  Terms  of  sale 

6.  General  policies 

Capital 

Capital  must  be  considered  first,  for  on  the  amount  of 
capital  the  exporter  has  at  his  disposal  will  depend  the  char- 
acter of  the  other  factors.  Large  capital  is  not  always  neces- 
sary. If  he  is  satisfied  to  grow  slowly,  but  little  if  any  addi- 
tional capital  is  needed  to  start.  When  more  rapid  progress 
is  desired  a  few  thousand  dollars  will  often  suffice  when  the 
exporter  does  not  depend  entirely  on  his  export  business  for  his 
maintenance.  Generally  speaking,  however,  unless  he  is  pre- 
pared to  make  a  substantial  outlay  for  the  development  of  the 
business,  it  would  be  better  not  to  enter  the  field. 

Information 

The  amount  of  information  necessary  for  an  exporter  de- 
pends entirely  on  the  other  factors.  If  the  exporter  is  satisfied 
with  the  occasional  order  through  a  commission  house  which 
the  casual  advertisement  in  an  export  paper  may  bring,  exten- 

8 


SIX   FUNDAMENTALS   OF   FOREIGN   TRADE  9 

sive  information  is  superfluous.  But  if  direct  trade  is  con- 
templated, with  a  special  organization  to  conduct  it,  all  the 
information  available  become?  an  absolute  necessity.  In  the 
chapters  which  follow  the  kinds  of  information  needed  and 
the  ways  in  which  it  may  be  acquired  will  be  fully  discussed. 

Method  of  Distribution 

There  are, six  general  methods  or  channels  of  distribution: 

1.  Export  houses  (merchant  and  commission) 

2.  Mail  order 

3.  Travelers 

4.  Local  agents  abroad 

5.  Branch  office  or  special  organization  or  arrangement 

abroad 

6.  Co-operation 

The  choice  of  the  method  depends  on  what  the  exporter 
aims  to  accomplish,  on  the  amount  of  capital  at  his  disposal, 
the  kind  of  merchandise  he  handles,  and  many  similar  factors. 
Usually  more  than  one  and  sometimes  all  of  these  six  methods 
of  distribution  are  adopted  simultaneously. 

If  the  would-be  exporter  is  merely  experimenting  or  mak- 
ing the  preliminary  moves,  he  may  choose  to  solicit  orders 
from  a  local  export  house.  He  may  also  use  an  occasional  ad- 
vertisement in  an  export  paper,  at  the  same  time  corresponding 
with  foreign  buyers  and  ^agents.  Little  outlay  is  required  for 
such  a  procedure,  but  the  results  are  extremely  slow  and 
uncertain.  This  course  is  wise  in  case  a  manufacturer  wishes 
to  dispose  of  a  small  production  which  he  fears  home  markets 
will  not  absorb.  It  is  wise  if  he  wishes  merely  to  develop 
inquiries  from  abroad  and  to  establish  foreign  connections 
slowly  and  at  little  expense.  But  he  should  not  expect  large 
results  from  this  method  or  become  discouraged  if  the  process 
is  much  slower  than  he  originally  anticipated.     This  method 


lO  GENERAL   CONSIDERATIONS 

has  been  pursued  by  most  of  the  manufacturers  in  this  country 
who  are  engaged  in  exporting — which  in  a  measure  explains 
why  our  direct  export  trade  has  not  been  larger. 

At  the  same  time  it  must  be  remembered  that  cautious  pro- 
cedure is  much  more  desirable  than  that  of  the  man  who  tries 
to  do  too  much  with  too  little — too  little  knowledge,  too  little 
capital,  and  too  little  organization.  Such  a  man  usually 
attempts  to  sell  through  commission  houses,  mail  orders,  trav- 
elers and  local  importers,  or  agents  abroad — through  nearly  all 
the  principal  channels  of  trade,  without  first  studying  the  re- 
quirements. He  soon  comes  to  the  conclusion  that  the  game  is 
not  worth  the  candle ;  he  finds  the  expenditures  altogether  out 
of  proportion  to  the  profits  and  he  concludes  that  there  is 
nothing  in  the  export  trade.  There  will  never  be  anything  in 
export  trade  for  men  who  aim  to  do  business  in  a  rush  and 
attempt  everything  without  first  testing  anything. 

The  only  wise  courses  to  pursue  are  either  to  enter  export- 
ing with  thorough  equipment,  or  to  begin  on  the  very  small 
scale  indicated  in  the  first  instance.  Should  the  first  method 
be  selected  the  exporter  will  need  sufficient  capital,  complete 
knowledge  of  the  field,  the  establishment  in  foreign  countries 
of  branch  offices,  agencies,  or  subsidiary  organizations,  the 
adoption  of  proper  terms  of  sale,  and  the  formulation  of  poli- 
cies that  will  stand  the  test  of  time. 

If  the  resources  of  the  concern  are  not  large  enough  to 
enable  it  to  stand  alone,  co-operation  should  be  sought  with 
other  exporters  in  similar  or  non-competing  lines  with  a  view 
to  a  joint  investigation  and  exploitation  of  the  field  by  means 
of  the  combined  resources  in  distribution,  advertising,  selling, 
and  branch  office  administration. 

Organization 

In  direct  exporting  the  manner  of  developing  and  handling 
business  is  important.     The  type  of  organization  must  vary 


SIX   FUNDAMENTALS   OF   FOREIGN   TRADE  il 

with  conditions.  Very  frequently  the  formation  of  a  separate 
company  is  the  most  practical  way  of  promoting  export  busi- 
ness. The  new  organization  may  be  an  allied  company,  a 
joint  selling  company,  an  independent  company,  or  any  type 
of  combination  permitted  under  the  Webb  Law. 

In  the  case  of  the  allied  company,  the  name  of  the  parent 
house  may  be  used  for  the  company  which  is  organized  abroad 
to  handle  the  trade  in  the  particular  territory.  Such  company 
may  or  may  not  be  controlled  by  the  producing  concern  and 
the  whole  risk  of  selling  for  export  in  a  particular  territory  is 
frequently  assumed  by  the  allied  organization.  It  is  a  matter 
of  business  and  legal  detail  to  decide  whether  or  not  in  a  given 
case  the  formation  of  an  allied  company  is  best  and  to  what 
extent  independent  or  exclusive  rights  should  be  granted  it. 

A  joint  selling  company,  such  as  the  United  States  Steel 
Products  Company,  can  be  said  to  be  merely  an  export  depart- 
ment acting  as  a  separate  sales  organization  for  a  number  of 
competing  manufacturers.  The  advantages  of  such  an  organ- 
ization in  selling  the  products  of  a  number  of  producers  are 
manifold.  It  usually  buys  goods  from  the  concern  or  asso- 
ciated concerns  for  which  it  is  acting  at  prices  allotted  in 
advance  or  during  the  year,  with  a  periodic  settlement  of 
accounts  according  to  previously  arranged  plans. 

An  independent  company  organized  for  export  may  take 
numerous  forms — it  may  be  essentially  a  commission  house  or 
an  agency  handling  the  products  of  different  manufacturers,  as 
in  the  case  of  the  North  American  Copper  Company;  it  may 
be  a  co-operative  company  representing  various  manufacturers 
in  non-competitive  lines  in  foreign  markets,  as  the  National 
Paper  and  Type  Company ;  it  may  act  as  a  selling  agent  for  a 
company  made  up  of  allied  manufacturers,  as  is  the  case  of  the 
American  International  Corporation  in  connection  with  the 
Allied  Machinery  Company  of  America.  Further  discussion 
of  this  subject  appears  in  Chapter  XIX. 


12  GENERAL   CONSIDERATIONS 

The  type  of  export  organization  to  be  created  or  adopted 
will  naturally  depend  upon  the  nature  of  the  product,  the 
financial  resources  of  the  manufacturer,  the  condition  of  the 
markets,  and  the  general  financial  situation  throughout  the 
world.  For  a  small  concern  entering  the  export  field,  even  the 
creation  of  a  separate  sales  organization  is  usually  unneces- 
sary. The  foreign  department  of  a  large  company  should  be 
fitted  to  transact  every  kind  of  export  business  for  foreign 
countries.  A  large  concern  would  not  think  of  giving  up 
indefinitely  its  selling  rights  to  a  separate  organization,  but 
would  devise  a  flexible  plan  adaptable  to  the  varying  conditions 
under  which  the  particular  product  has  to  be  handled  abroad. 
The  laws  of  the  country  where  export  business  is  to  be  trans- 
acted will  have  much  to  do  with  determining  the  plans  for  a 
separate  selling  organization  abroad. 

The  Terms  of  Sale 

The  terms  of  sale  constitute  a  very  important  point  in 
connection  with  foreign  trade.  No  other  question  so  interests 
the  foreign  purchaser.  His  first  demand  in  every  market  will 
be  for  long-time  credits,  and  the  American  exporter  must  be 
prepared  for  it.  The  bulk  of  our  foreign  trade  is  at  present 
conducted  on  what  is  practically  a  cash  basis,  the  commonest 
form  of  payment  being  the  bank  acceptance.  Of  late  a  revival 
of  the  trade  acceptance  has  had  its  enthusiastic  supporters. 
The  details  of  the  operation  of  these  methods  of  financing 
foreign  trade  need  not  concern  the  reader  at  this  point.  Suffice 
it  to  say  here  that  from  the  buyer's  viewpoint  they  offer  all 
the  time  recjuired  for  payment,  while  to  the  seller  they  mean 
cash  as  soon  as  the  goods  are  placed  on  the  vessel. 

One  of  the  chief  elements  of  success  in  export  trade  is  for 
the  seller  to  discover  a  way  of  giving  credit  to  his  customers  or 
to  some  of  his  customers  without  being  himself  the  sufferer, 
for  credit  has  been  in  the  past  and  will  be  increasingly  in  the 


SIX    FUNDAAIENTALS    OF   FOREIGN   TRADE  13 

future,  a  leading  factor  in  overcoming  competition  and  in 
extending  trade.  To  that  end  the  seller  should,  through  the 
agency  of  his  bank,  arrange  for  the  acceptance  of  his  draft  by 
the  buyer,  the  bank  meanwhile  advancing  the  greater  part  of 
the  value  of  the  shipment  on  the  security  of  the  documents 
w^hich  give  title  to  the  goods. 

Certain  specific  methods  will  be  discussed  later.  In  the 
meantime  it  seems  self-evident  tliat  so  long  as  European  ex- 
porters continue  to  grant  the  more  attractive  credits  the 
American  exporter  faces  a  disadvantage,  unless  he  is  able  to 
outsell  his  European  competitor  through  the  superiority  of  his 
product,  or  the  efficiency  of  his  service. 

Miscellaneous  Export  Policies 

Next  in  importance  to  the  credit  policy  comes  the  deter- 
mination of  the  quality  of  the  article  sold  and  the  margin  of 
profit  to  be  earned.  The  greater  the  margin  of  profit  the 
greater  may  be  the  extension  of  credit  and  the  selling  expendi- 
tures. In  fixing  the  selling  price  abroad  the  exporter  should 
be  governed  as  much  by  local  conditions  as  by  his  previous 
experience  in  the  domestic  field.  Whether  his  price  be  higher 
or  lower  than  at  home,  his  margin  of  profit  should  be  large 
enough  to  permit  of  its  reduction  under  the  stress  of  foreign 
competition. 

If  the  goods  have  been  manufactured  for  export  and  with 
a  view  to  the  requirements  of  each  market,  they  will  generally 
stand  an  increase  in  the  margin  of  profit  over  and  above  the 
normal.  For  it  must  never  be  forgotten  that  next  to  extended 
credit  what  the  foreign  buyer  wants  from  the  exporter  is 
quality,  and  the  concern  which  happily  combines  these  two 
finally  determining  factors  is  on  the  way  to  certain  success. 

There  are  other  policies  less  fundamental  but  sometimes  no 
less  vital,  the  most  important  of  which  will  be  discussed  later. 
The  proper  methods  of  choosing  and  training  men  for  foreign 


I^  GENERAL   CONSIDERATIONS 

service,  the  methods  of  packing  and  shipping  merchandise,  the 
wrapping  of  packages  for  display,  etc.,  the  rehabihty  of  the 
exported  article,  the  rate  of  discount  for  cash,  the  expense  and 
the  methods  of  selling — all  these  are  determining  factors  in 
the  policies  of  the  exporting  concern. 


CHAPTER   III 

FOREIGN  TRADE  STRATEGY  AND  ITS 
ESSENTIALS 

Strategy  in  Foreign  Trade 

Recent  events  have  demonstrated  that  war  may  be  a  busi- 
ness, and  there  is  much  in  business  which  resembles  war. 
Every  business  campaign  to  be  sound,  should,  like  a  military 
campaign,  be  based  on  strategy.  That  is  the  most  vital  prin- 
ciple in  war  and  business  alike.  But  although  to  a  military 
man  the  word  strategy  has  a  world  of  meaning,  to  a  man  of 
affairs  it  is  still  vague  and  uncertain.  He  grasps  its  full  sig- 
nificance only  after  he  has  resolved  a  proposition  into  its 
component  parts. 

Military  strategy  is  the  art  by  which  Scipio  conquered 
Carthage,  Caesar  Gaul,  and  Napoleon  the  greater  part  of 
Europe.  It  is  the  science  of  military  movements  in  the  game 
of  war,  and  not  the  mere  theory  of  the  scholar,  nor  the  inspira- 
tion of  genius.  To  be  scientific,  strategy  must  be  based  on 
exact  knowledge,  systematized  and  brought  to  a  perfect  focus. 
In  business,  strategy  is  the  art  of  commercial  conquest.  It  is 
the  science  of  mercantile  operations,  by  virtue  of  which  Rocke- 
feller extended  his  commercial  organization  throughout  the 
world.  It  is  the  science  by  which  the  modern  captains  of 
finance  and  industry  everywhere  have  accumulated  their  untold 
milUons. 

Commercial  strategy  is  based  upon  the  knowledge  of  the 
factors  which  underly  mercantile  and  financial  movements 
directed  toward  overcoming  competition  and  extending  opera- 
tions to  their  utmost  capacity.    In  foreign  trade,  strategy  is  by 

15 


l6  GENERAL   CONSIDERATIONS 

far  a  more  difficult  and  more  complicated  affair  than  it  is  in 
domestic  trade,  just  as  the  knowledge  upon  which  it  is  based  is 
more  intricate  and  less  easy  to  acquire.  In  domestic  trade, 
instinct  is  of  itself  a  kind  of  knowledge.  Most  people  acquire 
a  sense  for  the  right  action  almost  automatically,  through  long 
association  with  men  and  affairs  and  through  the  influence  of 
environment.  One  needs  only  to  be  born  and  bred  in  the 
United  States  and  to  have  an  ordinary  education  and  common 
sense  to  be  a  fair  judge  of  his  countrymen  and  to  understand 
their  customs,  their  tastes,  and  their  manner  of  doing  business. 
Even  the  knowledge  of  the  laws  of  the  country  is  acquired 
v^ithout  perceptible  effort  through  environment — through  the 
ordinary  intercourse  and  reading  of  daily  life. 

Definite  Study  Essential 

But  instinct  helps  little  in  foreign  trade.  There  one  must 
learn  the  character  of  the  people,  their  ways,  their  business 
methods,  and  other  fixed  conditions  prevailing  in  a  given  coun- 
try through  patient  study  and  observation  on  the  ground. 
Without  this  knowledge  the  trader  may  encounter  difficulties 
which  will  prove  disastrous  to  his  venture.  The  amount  of 
knowledge  requisite  to  a  well-directed  effort  in  a  foreign  field 
seems  to  bewilder  and  frighten  many  a  manufacturer.  This  to 
some  extent  accounts  for  the  fact  that  so  many  American 
producers,  instead  of  handling  their  export  business  them- 
selves, leave  it  entirely  to  the  care  of  commission  houses. 

After  all,  when  the  intricacies  are  fully  considered,  the 
knowledge  necessary  to  the  successful  conduct  of  foreign  trade 
is  no  more  impossible  to  gain  than  the  knowledge  of  many 
other  phases  of  business  activity,  only  requiring  systematic, 
intelligent  endeavor.  It  is  not  the  object  here  to  teach  business 
strategy  in  international  trade,  but  merely  to  point  out  the 
essentials  in  the  store  of  information  which  must  be  acquired 
before  one  can  qualify  as  a  strategist  in  that  field. 


FOREIGN  TRADE  STRATEGY  1 7 

The  Collection  of  Information 

In  one  sense  strategy  is  a  deduction.  There  must  be  definite 
data  in  hand  from  which  the  deductions  may  proceed.  The 
first  step  toward  the  acquisition  of  strategic  information  is  to 
find  out  what  data  are  essential  and  through  what  channels 
such  data  may  best  be  obtained. 

There  are,  of  course,  in  every  country  various  sources  of 
trade  information,  such  as  governmental  bureaus,  banks,  and 
trade  associations,  which  will  be  more  fully  discussed  in  the 
next  chapter.  Volumes  upon  volumes  of  material  have  been 
gathered  by  consuls  and  representatives  of  private  concerns  in 
all  parts  of  the  world.  The  reader  must  be  able  to  discrim- 
mate,  however,  otherwise  years  of  study  and  research  would 
be  only  so  much  waste  of  time. 

Investigation  on  the  Spot 

An  international  trader  should  take  as  his  fundamental 
maxim,  that  the  most  valuable  information  is  that  which  is 
acquired  on  the  ground  and  personally  by  one  who  will  par- 
ticipate in  the  planning  of  a  selling  campaign  in  a  given  coun- 
try or  market.  The  information  acquired  at  home  and  all 
other  second-hand  information  is  of  less  value  and  most  help- 
ful to  the  extent  that  it  facilitates  personal  research.  The 
study  of  actual  cases  has  fully  demonstrated  that  the  concerns 
which  have  made  a  success  in  foreign  ventures  have  acted 
upon  this  principle,  and  that  those  which  failed  have  relied 
wholly  on  second-hand  information. 

While  the  information  collected  on  the  ground  concerning 
demand  and  supply  and  the  structure  and  psychology  of  the 
market  shows  the  immediate  trade  status,  it  should  be  sup- 
ported by  wider  study  both  of  the  foreign  country  itself  and  of 
its  relations  with  the  United  States.  A  physical  examination 
of  the  human  body  shows  the  present  state  of  a  man's  health, 
but  it  does  not  indicate  whether  it  is  likely  to  improve  or  grow 


l8  GENERAL   CONSIDERATIONS 

worse.  To  determine  that  one  should  know  the  man's  mode 
of  living,  his  occupation  and  habits,  and  his  history,  personal 
and  ancestral.  So  it  is  with  a  market.  Knowledge  of  tli«  pres- 
ent status  gives  no  certain  indication  of  the  future.  Some 
attention  must  be  given  to  the  study  of  the  political,  govern- 
mental, and  legal  status  of  the  country  under  investigation,  of 
its  history  and  economic  conditions,  and  possibly  of  the  struc- 
ture of  its  society. 

The  details  to  be  mastered  will  vary  with  each  case  and  the 
man  who  knows  his  own  business  must  be  his  own  final  judge 
of  what  to  learn  and  what  to  pass  by.  But  it  is  always  well  for 
him  to  know  the  nature  of  the  relationship  between  the  foreign 
country  and  his  own.  Diplomacy  nowadays  is  a  part  of  inter- 
national trade  strategy,  covering  the  action  of  parliaments,  the 
policies  of  governments,  and  the  fortunes  of  war. 

The  trade  of  the  world  in  the  future  will  be  far  more 
active  than  ever  before,  the  attack  upon  new  fields  will  be 
sharper,  fiercer,  more  international,  and  more  overwhelming. 
This  fact,  with  the  continually  changing  conditions,  makes  it 
impossible  to  place  complete  reliance  on  any  but  the  most 
recent  records  which  have  been  prepared  for  a  given  market, 
however  useful  other  information  may  be  as  indicating  approx- 
imate conditions. 

What  May  Be  Learned  at  Home 

Nevertheless,  a  theoretical  knowledge  of  foreign  trade 
should  be  acquired  first  through  home  study.  The  main  facts 
of  demand  and  supply,  and  of  all  the  necessary  conditions  and 
requirements  of  trade  in  a  given  market  can  thus  be  learned. 
If  the  interests  involved  are  large  the  trader  should  visit  the 
country  with  which  trade  is  contemplated  and  make  an  actual 
survey  of  the  market  by  personal  observation,  applying  and 
confirming  second-hand  knowledge  derived  from  books,  jour- 
nals, reports,  papers,  and  correspondence.     Then  and  not  till 


FOREIGN   TRADE   STRATEGY  19 

then  is  he  ready  to  draw  final  phins  for  a  commercial  campaign. 

Strategic  information  of  primary  importance  is  the  knowl- 
edge of  demand  and  supply — their  sources  and  extent  with 
reference  to  a  given  product  in  a  given  country.  A  man  does 
not  look  for  bread  in  a  desert,  nor  will  he  try  to  sell  his  wares 
either  in  a  country  which  has  no  need  for  them,  or  in  one  in 
which  the  markets  are  overstocked  with  similar  lines.  But  that 
is  not  all.  Scientific  direction  of  business  in  any  territory 
requires  familiarity  with  the  nature  and  quality  of  the  goods 
to  be  sold,  their  possible  uses,  the  prevailing  prices,  extent  of 
existing  competition,  and  whether  or  not  the  demand  is  actual, 
real,  and  permanent.  Such  data  as  well  as  the  knowledge  of 
the  people,  their  tastes,  habits,  and  business  methods  can  best 
be  learned  through  personal  observation. 

Supply  and  price  are  by  no  means  all  that  control  trade  in 
any  country,  for  the  state  of  mind  of  the  people  is  quite  as 
important  an  item. 

Study  of  the  Psychology  and  the  Structure  of  the  Market 

The  study  of  the  psychology  and  the  structure  of  the  mar- 
ket is,  therefore,  important,  for  it  should  be  remembered  that 
every  market  has  its  peculiar  structure  and  its  distinct  psycho- 
logical aspects.  Every  nation,  nay  every  city,  has  its  collective 
soul,  or  atmosphere,  and  so  every  market  has  its  distinctive 
characteristics. 

A  market,  after  all,  is  the  manifestation  of  the  feelings, 
desires,  and  the  material  aspirations  of  the  people.  Its  condi- 
tion reflects  the  conditions  which  prevail  among  them.  Find 
the  measure  of  the  market  and  there  will  be  found  the  measure 
of  the  people  that  make  it  what  it  is,  and  conversely.  The 
structure  of  the  market  is  more  apparent  after  one  has  exam- 
ined the  methods  of  distribution,  the  mercantile  systems  exist- 
ing in  a  particular  territory,  and  the  commercial  laws  and  cus- 
toms upon  which  they  are  founded.    The  observer  learns  by 


20  GENERAL   CONSIDERATIONS 

comparison.  Knowing  the  commercial  methods  and  the  struc- 
ture of  the  domestic  market  in  his  own  pecuHar  line,  if  he  is 
a  keen  observer,  he  will  quickly  note  the  differences  in  the 
foreign  market.  In  the  same  way,  he  grasps  the  financial  situa- 
tion. Once  the  conditions  of  demand  and  supply  and  the 
structure  and  psychology  of  the  market  are  ascertained,  other 
knowledge  comes  naturally  and  as  a  matter  of  course. 

Charting  the  Results  of  Investigation 

After  the  prospective  trader  has  completed  each  detail  of 
his  survey  on  the  ground,  the  results  of  his  investigation  should 
be  reduced  to  writing.  At  the  conclusion  of  the  trip  these  data 
should  be  carefully  classified,  digested,  and  embodied  in  a 
chart.  This  chart  becomes  the  war  map  of  the  foreign  trade 
strategist,  or  of  the  strategic  board  that  is  to  sit  in  judgment 
upon  the  accumulated  data,  and  formulate  conclusions  as  to 
the  advisability  of  a  campaign,  and  of  its  nature  and  extent  in 
a  given  territory.  (See  "Investigator's  Summary  of  Analysis 
Sheet"  in  Appendix  D.) 

One  may  feel  that  it  is  not  an  easy  thing  for  a  stranger  to 
obtain  information  in  a  strange  land  and  may  be  uncertain  as 
to  how  to  proceed.  The  difficulties  of  m.aking  such  investi- 
gations are  not,  after  all,  so  much  greater  than  they  are  at 
home  except  that  the  process  usually  takes  a  little  longer. 
The  channels  are  the  same,  and  abroad  one  may  have  in  addi- 
tion the  assistance  of  the  diplomatic,  consular,  and  trade 
representatives  of  his  own  country.  All  these  are  at  the  serv- 
ice of  the  trader,  or,  if  he  cannot  or  does  not  care  to  go  abroad 
himself,  of  his  representative. 

To  get  in  touch  with  the  market,  to  examine  the  Mnes  of 
current  merchandise,  and  to  study  the  methods  of  competition 
at  close  range  are  alone  w^orth  the  cost  of  the  trip.  A  better 
knowledge  and  grasp  of  actual  conditions  can  be  obtained  by 
personal  observation  in  a  week  than  can  ever  be  learned  at 


FOREIGN    TRADE    STRATEGY  21 

home.  Besides,  why  place  the  cart  before  the  horse?  If  the 
entrance  into  the  market  is  desirable,  someone  must  go  there  to 
sell,  if  selhng  is  to  be  direct;  why  not  let  him  first  investigate? 

The  Formulation  of  Plans 

Not  many  American  business  houses  have  as  yet  developed 
in  their  organizations  anything  like  a  board  of  strategy,  nor 
can  it  be  said  even  yet  that  trade  strategy  is  a  generally  ac- 
cepted factor  in  the  conduct  of  business.  The  tendency,  how- 
ever, in  large  business  undertakings  is  manifestly  in  this  direc- 
tion. In  nearly  every  organization  there  is  some  individual 
or  group  concerned  with  the  deliberate  planning  of  the  selling 
campaigns  and  in  superintending  their  execution. 

In  recent  years  advertising  agencies  in  the  United  States 
have  gradually  developed  into  just  such  strategic  boards  for 
planning  and  conducting  selling  campaigns.  Some  of  these 
agencies  have  their  own  strategic  organizations;  others  advise 
their  clients  how  to  proceed  in  the  development  of  their  trade — 
chiefly  domestic  trade — very  much  on  the  lines  indicated  here. 
They  are  acting  upon  the  theory  that  modern  merchandising 
or  scientific  selling  calls  for  carefully  organized  research  into 
trade  conditions — for  analysis  of  markets,  study  of  the  con- 
sumer, and  development  of  the  technique  of  trade.  It  is 
always  wisest  to  start  on  a  foreign  trade  reconnoltering  expe- 
dition with  a  definite  written  plan  as  to  the  information  to  be 
obtained,  what  is  to  be  studied,  and  how  to  proceed.  (See 
Appendix  D  for  "Investigator's  Instruction  Sheet"  and  "In- 
vestigator's Analysis  Sheet.") 

The  chief  work  of  the  strategist  comes  after  all  this. 
When  he  has  gathered  his  necessary  information  he  decides 
upon  the  nature  of  his  campaign,  devises  selling  methods,  pre- 
pares the  plan  of  sales,  selects  representatives,  creates  a  sales 
organization,  and  does  all  that  is  necessary  to  the  successful 
conduct  of  business  in  a  particular  country.     If  the  strategic 


22  GENERAL   CONSIDERATIONS 

knowledge  has  been  wisely  obtained,  the  plans  carefully  drawn 
and  carried  out,  and  the  market  conditions  are  favorable,  then 
all  the  elements  of  success  are  present. 

Recapitulation 

In  the  succeeding  chapters  the  principal  lines  which  every 
strategic  investigation  in  foreign  markets  should  follow  will 
be  considered  separately  and  in  some  detail.  But  before 
ending  this  chapter  the  following  points  should  be  emphasized. 

Essentially  there  is  no  difference  between  domestic  and 
foreign  trade.  The  basic  principles  remain  the  same  whether 
the  commerce  is  between  people  of  the  same  country  or  of 
different  hemispheres.  The  differences  between  the  two  kinds 
of  trade  are  differences  of  detail.  In  overseas  trade  the  details 
are  naturally  more  complicated  and  less  easy  to  master. 

The  most  up-to-date  methods  of  trade-preparedness  study, 
and  of  the  investigation  and  planning  which  form  the  basis 
of  domestic  business  campaigns,  should  be  adopted  in  foreign 
trade.  This  study  will  include  a  complete  understanding  of 
the  supply  and  the  demand  for  the  product  the  exporter  is  to 
offer,  and  of  the  structure  and  psychology  of  the  market  in 
which  it  is  to  be  pushed.  The  plan  should  be  formulated  with 
scientific  exactness  and  cover  the  following  steps: 

1.  A  preliminary  home  study  of  the  contemplated  market. 

2.  A  written  plan  of  investigation  to  be  conducted  at 

first  hand,  if  possible. 

3.  A  compilation  of  the  data  thus  obtained,   digested, 

classified,  systematized,  and  embodied  in  a  chart. 

4.  A  written  plan  of  the  campaign  to  be  based  firmly  on 

these  data  and  to  be  carried  out  with  vigor  and  with 
painstaking  precision. 

When  this  has  been  done  the  trader  may  feel  that  he  has 
made  a  truly  adequate  preliminary  preparation  for  his  task. 


CHAPTER    IV 
SOURCES  OF  FOREIGN  TRADE  INFORMATION 

Statistical  Information 

Statistical  information  may  be  governmental  or  private. 
Governmental  statistics  are  gathered  by  nearly  every  country 
and  cover  almost  everything.  An  important  part  of  every  gov- 
ernment's statistical  data  is  that  which  is  drawn  from  or  con- 
cerns foreign  trade. 

Defects  of  Governmental  Statistics 

Such  data,  however,  to  be  really  useful,  should  be  properly 
compiled  and  classified.  In  some  countries  more  attention  is 
paid  to  this  very  essential  point  than  in  others.  Unfortunately, 
in  many  instances  the  greater  stress  is  laid  on  the  accumulation 
of  a  mass  of  facts;  hence  the  student  of  the  world's  trade  is 
frequently  obliged  to  classify  and  digest  such  statistical  in- 
formation as  he  may  obtain  on  the  subject  which  interests  him. 
If,  instead,  ways  and  means  were  devised  for  the  organization 
and  compilation  of  the  material  gathered — for  placing  it  in 
such  form  as  to  be  easily  accessible  to  all  who  are  interested 
in  any  line  of  investigation — its  sphere  of  usefulness  would  be 
greatly  increased  and  the  ends'  of  science  better  served.  This 
work  is  in  itself  a  science.  No  great  skill  is  necessary  to  com- 
pile the  figures  obtained  at  a  custom  house,  but  it  takes  a  great 
deal  of  skill  and  originality  to  place  each  item  where  it  belongs 
and  so  to  arrange  the  data  that  they  touch  every  pursuit  and 
fill  every  requirement.  On  the  whole,  the  government's  sta- 
tistical information  is  usually  defective,  because  it  embraces 
too  large  a  field  and  for  the  most  part  is  too  general. 

23 


24  GENERAL    CONSIDERATIONS 

But  one  has  to  avail  oneself  of  governmental  statistics 
when  necessity  arises,  whether  they  are  defective  or  not.  The 
statistical  annals  of  foreign  governments  should  be  consulted 
when  those  of  one's  own  government  fail  to  satisfy  the  par- 
ticular inquiry.  For  a  comparative  statement  of  imports  and 
exports  of  every  country  the  writer  has  found  the  British 
Abridged  Annual  very  convenient. 

When  complicated  information  is  sought  an  expert  should 
usually  be  employed  to  search  out  the  information  concealed 
in  the  maze  of  figures.  Large  concerns  have  their  own  statis- 
tical departments,  and  a  number  of  private  firms  make  it  their 
business  to  supply  statistical  information.  All  of  these  people, 
however,  have  to  depend  largely  on  governmental  sources,  and 
the  chief  value  of  these  works  lies  in  the  arrangement  of  mate- 
rial and  in  its  presentation  in  such  form  as  to  make  it  available 
to  the  average  business  man. 

Miscellaneous  Sources  of  Information 

To  the  miscellaneous  sources  of  information  belong  consu- 
lar reports  and  other  governmental  publications  on  the  subject 
of  foreign  trade,  current  discussions  at  conferences  of  export- 
ers and  trade  associations,  the  articles  in  the  trade  journals, 
and  the  information  disseminated  by  the  chambers  of 
commerce,  boards  of  trade,  and  various  foreign  trade  organi- 
zations. 

Consular  Information 

Consular  information  is  not  only  useful,  but  indispensable. 
It  is  unfortunate  that  manufacturers  and  exporters  are  not  apt 
to  think  of  governmental  assistance  until  they  are  in  trouble, 
and  when  not  the  preventive  but  the  cure  is  required.  Still,  it 
is  a  well-known  fact  that  the  government  bureaus  are  not  so 
efficient  an  instrumentality  for  good  as  they  might  be  expected 
to  be.    They  are  often  slow  and  unprogressive.    In  the  United 


SOURCES   OF   INFORMATION  25 

States  many  special  reports  published  by  the  Department  of 
Commerce  are  too  antiquated  to  be  useful. 

Trade  Discussions 

Every  year  discussions  of  special  topics  are  held  at  various 
trade  meetings  throughout  the  country,  which  are  published 
for  the  most  part  either  in  special  reports  or  in  the  trade 
papers.  The  trade  papers  print  also  from  time  to  time  the 
experiences  of  traveling  men  and  the  opinions  of  professional 
writers.  It  cannot  be  said,  however,  that  these  sources  of 
foreign  trade  information  have  yet  reached  in  every  case  the 
stage  where  it  would  pay  a  busy  man  to  spend  much  time  in 
studying  them. 

Special  trade  information,  such  as  is  gathered  and  dis- 
seminated by  trade  associations — for  instance,  the  Automobile 
Manufacturers'  Association — is  exceedingly  valuable  if  prop- 
erly organized.  This  is  really  the  best  method  for  the  acquisi- 
tion of  special  knowledge.  It  is  a  pity  that  such  associations 
do  not  pay  more  attention  to  this  particular  line  of  work. 

Governmental  Trade  Investigation 

In  the  preceding  chapter  stress  was  laid  upon  the  value  of 
first-hand  trade  infonnation.  The  securing  of  such  informa- 
tion necessitates  a  personal  trip  into  the  country  under  investi- 
gation. On  account  of  the  large  expense  involved  such  a  trip 
is  oftentimes  impossible.  The  government,  realizing  the  hand- 
icap upon  smaller  manufacturers  who  are  ambitious  for  for- 
eign trade,  is  sending  out  special  investigators  into  various 
countries  to  study  and  report  on  trade  conditions.  Each  of 
these  representatives  is  empowered  to  carry  on  an  investiga- 
tion in  some  specific  line,  such  as  hardware  or  automobiles. 

While  this  is  an  excellent  idea,  such  an  investigation  usually 
covers  so  large  a  field  and  takes  so  long  a  time  that  when  it 
is  completed  and  published  many  of  its  points  are  out  of  date 


26  GENERAL   CONSIDERATIONS 

and  consequently  are  not  only  useless  but  misleading.  Then 
again,  the  investigators  are  not  always  particularly  well  quali- 
fied and  trained.  But  perhaps  the  most  important  objection  of 
all  to  their  employment  is  the  fact  that  since  their  work  is 
limited  to  investigation,  they  have  no  such  special  interest  in 
the  subject  as  would  be  the  case  if  they  had  any  hope  of 
advancement,  of  larger  earnings,  or  of  permanent  employ- 
ment. Notwithstanding  all  this,  their  reports  are  of  great 
value  in  promoting  American  commerce  abroad. 

Trade  Representatives'  Investigations 

Perhaps  of  still  greater  value  would  be  the  reports  of  an 
investigation  in  a  foreign  country  based  on  the  requirements 
of  a  particular  trade  and  furnished  by  a  representative  of  a 
trade  association  in  a  particular  line.  The  result  would  be 
more  gratifying  to  the  individual  manufacturer  for  the  reason 
that  such  an  investigation  could  be  conducted  primarily  along 
the  lines  which  would  be  of  special  interest  to  the  majority  of 
the  members  or  to  an  export  combination  which  might  be 
forming.  In  any  event,  neither  the  government's  investigation 
nor  that  of  a  trade  association  representative  can  be  considered 
by  a  conservatively  managed  concern  as  anything  but  a  pre- 
liminary to  its  own  final  and  thorough  survey  of  the  field.  Of 
course,  when  a  number  of  concerns  enter  into  an  export  agree- 
ment for  the  creation  of  a  joint  sales  organization,  their  study 
of  the  market  by  their  own  representative  ought  be  deemed 
sufficient  and  his  reports  final. 

Miscellaneous  Printed  Matter 

Of  value  are  the  works  on  political  economy,  and  the 
essays  of  private  investigators  upon  different  aspects  of  the 
world's  commerce.  The  trouble  with  such  data  is  that  they  too 
quickly  get  out  of  tune  with  the  times.  Commercial  progress 
marches  rapidly  and  such  information  cannot  be  of  much  value 


SOURCES   OF   INFORMATION  27 

if  it  is  more  than  a  year  old.  Some  of  these  works  are  useful 
as  giving  a  general  idea  of  foreign  trade,  but  for  practical 
purposes,  to  the  man  who  wishes  to  learn  the  game  of  inter- 
national trade  quickly  and  without  waste  of  time,  this  source 
is  of  moderate  value  only. 

Sources  of  information  of  this  sort  which  have  been  found 
to  be  of  real  value  are  the  almanacs  and  year-books  of  the 
different  countries,  and  commercial  and  geographic  atlases. 

Original  Information 

Original  information  is  the  data  one  secures  for  oneself 
on  the  ground.  This  first-hand  knowledge  is  the  most  valuable 
of  all.  It  should,  of  course,  be  strictly  up  to  date^ — the  very 
latest  news  which  is  obtainable  in  the  world  of  trade  relating 
to  the  line  being  handled.  To  accumulate  a  large  volume  of 
knowledge  from  personal  observation  and  investigation,  the 
investigator  must  not  only  have  the  opportunity  but  ability  and 
special  qualifications  as  well. 

This  kind  of  information  must  be  secured  directly  from  the 
people  who  are  in  possession  of  the  facts,  and  if  it  is  to  be  of 
greatest  value  the  investigator  must  be  expert  In  the  subject  he 
is  investigating. 

The  available  sources  of  foreign  trade  information  are: 

1.  Consular  and  diplomatic  officers  and  commercial  at- 

taches of  the  home  government  in  a  given  countrv. 

2.  The  local  governmental  channels  of  the  country  under 

investigation. 

3.  Manufacturing,    financial,    and   mercantile   organiza- 

tions and  concerns,  such  as  boards  of  trade,  infor- 
mation bureaus,  banks,  and  the  opinions  of  the  fore- 
most Importers  in  a  given  line. 

4.  Special  trade  channels.     If  one  Is  In  the  steel  business 

his  special  channels  of  Information  would  be  all  the 
avenues  of  the  steel  trade.     These  channels  would 


28  GENERAL   CONSIDERATIONS 

Include  the  manufacturers  and  traders  In  steel  and 
their  trade  and  commercial  associations. 

The  first  two  of  the  above  sources  are  in  some  cases 
of  but  little  informative  value,  and  especially  when  extensive 
preliminary  information  has  been  secured  at  home.  Even  if 
they  are  not  available  as  sources  of  information  they  are  fre- 
cjuently  capable  of  giving  most  valuable  assistance  in  the  way 
of  advice  and  introductions. 

In  the  last  analysis  no  investigation,  no  matter  how  thor- 
ough, should  be  considered  as  all-sufficing  because  commercial 
life  is  not  stationary  but  is  continually  changing.  The  wisest 
thing  for  an  up-to-date,  progressive  house  to  do  is  to  keep 
someone  permanently  on  the  ground  who  can  be  in  constant 
touch  with  the  ever-fluctuating  trend  of  events  in  the  world 
of  commerce.  Above  all,  there  should  be  a  concrete  and 
definite  plan  of  procedure  and  a  clear  idea  of  the  knowledge 
desired  before  any  investigation  is  begun. 


CHAPTER   V 

DEMAND  AND  SUPPLY  IN  THE  FOREIGN  MARKET 

The  Principles  of  Demand 

The  investigator  in  the  foreign  field  need  not  delve  very 
deeply  into  the  philosophy  of  demand.  The  word  has  many 
implications  and  its  meaning  to  the  psychologist  is  vastly  dif- 
ferent from  the  political  economist's  conception.  From  what- 
ever point  of  view  it  is  considered,  however,  demand  always 
implies  two  factors — the  desire  to  possess  and  the  means  of 
purchase.    Beyond  this,  generalization  is  dangerous. 

Every  commodity  has  its  own  laws  of  demand  and  every 
market  has  its  own  peculiarities.  The  investigator  who  is  in- 
terested in  a  particular  product  must  study  the  reaction  thereto 
of  each  individual  market.  Nevertheless,  his  determination  of 
the  extent  and  character  of  the  demand  will  be  greatly  facili- 
tated if  he  constantly  bears  in  mind  certain  elementary  prin- 
ciples which  are  universal  in  their  application.  These  may 
be  stated  briefly  as  follows: 

1.  The  demand  for  a  given  product  rises  or  falls  with 

every  rise  or  fall  in  price. 

2.  When  a  market  demands  a  certain  commodity  at  any 

price,  the  price  is  determined  by  the  competition  of 
the  sellers. 

3.  With  every  reduction  of  price  more  will  be  demanded 

and  less  offered,  so  that  too  low  a  price  ultimately 
creates  an  unsatisfied  demand. 

4.  In  the  case  of  great  international  staples,  price  is  con- 

trolled by  the  demand  and  supply  in  the  world's 
markets. 

29 


so 


GENERAL   CONSIDERATIONS 


5.  Demand   indicates   the  degree  of  the  utiHty   of  the 

product,   and  a  scale   showing  the  demand   for  a 
given  commodity  indicates  its  present  status. 

6.  Demand  may  be  elastic  or  inelastic,  immediate  or  de- 

ferred, and  its  status  is  governed  by  the  social, 
economic,  political,  and  business  conditions  prevail- 
ing in  the  given  market. 
In  selecting  a  market  the  safest  rule  to  observe  is  to  enter 
only  those  markets  where  the  demand  for  a  particular  product 
is  already  established  and  clearly  defined,  so  that  both  its 
extent  and  quality  can  be  determined  in  advance.  If  no 
immediate  demand  is  apparent  the  conditions  of  the  country 
must  be  carefully  studied  to  see  whether  a  desire  for  the 
product  can  be  fostered  or  created,  and  whether  it  is  worth 
the  time  and  the  expense.  The  experience  of  the  past  shows 
that  concerns  have  often  sustained  financial  losses  by  venturing 
into  a  market  where  no  adequate  demand  could  be  created.  An 
illustration  of  this  point  is  the  experience  of  a  large  concern 
which  went  to  Central  America  to  sell  an  ordinary  cooking 
stove  used  in  northern  countries.  After  a  very  large  expendi- 
ture of  money,  the  concern  discovered  that,  owing  to  the 
climatic  conditions,  the  people  would  not  buy  the  new  stove. 
The  ill-judged  effort  to  sell  an  utterly  inappropriate  article 
was  entirely  wasted. 

Tests  of  Demand 

Correct  strategy  requires  that  before  venturing  into  a  for- 
eign market,  the  exporter  should  not  only  be  certain  that  his 
preliminary  information  indicates  a  well-defined  demand  for 
his  product,  but  that  he  knows  with  accuracy  the  nature,  qual- 
ity, and  extent  of  that  demand.  There  are  two  tests,  one 
quantitative  and  the  other  qualitative,  which  if  made  on  the 
basis  of  correct  statistical  information  will  give  him  these 
facts. 


DEMAND   AND    SUPPLY  31 

Quantitative  Tests 

The  quantitative  test  may  be  stated  thus:  The  total  amount 
of  domestic  manufacture,  pkis  the  total  amount  of  importa- 
tion, minus  the  total  amount  of  exportation  of  a  particular 
product,  will  show  the  status  of  the  demand  in  a  given  country 
for  that  product. 

The  amount  of  a  country's  importation  is  not  alone  neces- 
sarily the  measure  of  its  domestic  requirements.  England, 
Germany,  and  other  countries  imported  annually  immense 
quantities  of  merchandise  which  they  never  used  in  their  own 
country,  buying  for  export  only.  They  were  the  great  inter- 
national buyers  and  distributers  for  the  markets  of  the  world 
Goods  are  often  listed  as  coming  from  a  certain  country,  when, 
in  truth,  they  only  come  through  that  country.  For  instance, 
most  of  the  American  goods  sold  in  Russia,  up  to  the  time 
of  the  European  War,  were  imported  through  Germany  and 
listed  in  Russia  as  German  goods. 

Qualitative  Tests 

To  know  the  extent  of  a  demand  for  a  product  in  a  given 
country  is  not  of  itself  sufficient;  the  nature  and  quahty  of 
the  demand  must  also  be  determined.  It  is  not  enough  to 
know  that  Russia  uses  annually  a  certain  number  of  automo- 
biles. It  is  essential  that  the  different  qualities  used  and  the 
approximate  amount  of  each  quality  should  be  learned.  To 
this  end  the  following  qualitative  test  may  be  employed: 
Ascertain  the  amount  of  domestic  output  in  each  different 
grade  of  goods,  then  add  to  each  grade  the  amount  of  impor- 
tation of  a  similar  grade,  and  finally  subtract  from  the  totals 
of  each  grade  the  amount  of  similar  quality  that  is  exported. 
The  result  will  show  the  different  qualities  of  demand  and  the 
extent  of  each  quality. 

It  must  be  remembered  that  inasmuch  as  statistical  data 


32 


GENERAL   CONSIDERATIONS 


are  often  incorrect  such  tests  are  never  conclusive.  It  is  only 
when  they  are  supplemented  by  a  personal  investigation  that 
the  extent  and  quality  of  the  demand  may  be  truly  appraised. 
In  no  country  is  the  desire  for  a  given  product  evenly  dis- 
tributed. The  exporter  should  determine  in  each  case  the 
quantity  and  quality  of  the  demand  for  his  product  in  a 
particular  locality,  with  a  view  to  preparing  a  comparative 
statement  of  the  conditions  obtaining  in  a  given  market.  Until 
this  is  done  one  is  not  ready  to  inquire  into  the  reasons  for 
any  phenomena  in  the  nature  of  demand.  If  it  is  known  that 
one  locality,  with  a  population  three  times  as  large  as  another 
locality,  uses  only  one-fifth  as  much  of  a  certain  article,  there 
must  be  a  reason.  Such  discoveries  lead  to  a  study  of  condi- 
tions which  should  enable  the  trader  to  determ.ine  whether  or 
not  there  is  any  deferred  or  potential  demand,  and  whether 
it  is  elastic  or  inelastic. 

Potential  Demand 

The  existence  of  a  strong  potential  demand  may  change 
the  whole  policy  of  a  prospective  exporter  in  regard  to  a 
particular  market.  Both  the  immediate  and  the  deferred 
demand  for  a  commodity  are  affected  by  local  conditions.  A 
slight  change  in  conditions  may  result  in  greater  quantities 
being  required  at  a  higher  price  or  less  at  a  lower  price.  There 
are  as  many  degrees  of  elasticity  as  there  are  variations  in 
human  wants  or  in  the  ability  of  men  to  satisfy  these  wants. 
If  the  demand  is  inelastic,  it  may  be  destroyed  completely  by 
any  marked  increase  of  price.  Thus  a  definite  knowledge  of 
the  possibilities  of  extending  the  demand  for  a  product  in  a 
particular  market  is  not  only  desirable  but  often  indispensable, 
especially  when  extensive  advertising  is  contemplated. 

In  some  cases  it  is  easy  to  determine  the  potential,  deferred, 
or  probable  demand.  For  example,  it  is  obvious  that  after 
a  war  which  destroys  railroads,  bridges,  buildings,  and  even 


DEMAND    AND    SUPPLY  33 

entire  cities,  great  quantities  of  Imilding  material  will  im- 
mediately be  required.  Also,  through  the  great  European  War 
people  have  learned  the  value  of  auto-trucks,  and  it  is  reason- 
ably certain  that  there  will  now  be  an  increased  demand  for 
these  vehicles,  and  a  corresponding  increase  of  the  second- 
hand supply. 

As  a  rule,  however,  it  is  a  difficult  matter  to  estimate 
potential  demand  or  to  invent  new  wants  and  habits  for  a 
people.  In  backward  and  undeveloped  countries  a  necessary 
preliminary  to  the  stimulation  of  demand  is  the  awakening  of 
wants  and  desires  that  are  dormant  for  the  time  being.  In 
developed  countries  there  is  much  of  the  force  of  habit  in  con- 
sumption, and  as  very  few  producers  are  capable  of  invention, 
the  problem  of  creating  a  demand  is  never  an  easy  one.  A 
good  illustration  of  an  artificially  created  demand  is  that  for 
Postum,  Grape  Nuts,  and  other  similar  products.  Mr.  Post 
happened  to  observe  that  the  American  people  are  subject  to 
nerve  and  stomach  troubles  and  turn  readily  to  such  food 
substitutes  in  the  hope  of  improving  their  health. 

In  estimating  a  potential  demand  each  case  must  be  studied 
carefully  on  its  merits.  There  must  be  differentiation  between 
an  absolutely  new  demand  and  the  extension  of  an  old  demand, 
although  the  word  "potential"  may  be  used  in  both  cases. 
Different  methods  must  usually  be  employed  in  each  case. 

How  to  Study  Demand 

To  enter  a  foreign  market  upon  a  large  scale  without  a 
thorough  study  of  the  demand  is  like  embarking  upon  an  ocean 
voyage  without  providing  oneself  with  a  compass.  Many  con- 
cerns— it  would  be  surprising  to  know^  how  many — have  done 
this  foolish  thing  and  failed  to  accomplish  their  purpose.  The 
investigation  should  proceed  along  the  following  lines: 

I.  Find  out  the  law  of  demand  for  a  product  in  a  particu- 
lar market  from  the  aspects  of  that  market. 


34  GENERAL   CONSIDERATIONS 

2.  Determine  the  quantity  of  the  demand  by  means  of  the 

quantitative  test,  and  its  quality  and  extent  by  the 
quaHtative  test. 

3.  Supplement    both   tests   by    a   personal    investigation 

among  the  dealers. 

4.  Prepare  a  comparative  statement  of  demand  in  differ- 

ent localities  both  as  to  quality  and  quantity,  and 
compute  the  quantity  per  capita. 

5.  Study  the  general  conditions  of  the  market  and  deter- 

mine whether  the  demand  is  elastic  or  inelastic,  and 
how  much  potential  demand  can  be  counted  on. 

6.  Prepare   a  chart   which   will   set   out   briefly  all   the 

findings  on  the  subject. 

The  study  of  consular  reports  and  of  articles  in  export 
journals  may  assist  the  exporter  in  gauging  the  foreign 
demand  for  his  product,  but  only  when  he  has  followed  the 
steps  indicated  has  he  carried  out  a  scientific  investigation. 

The  Relation  of  Demand  and  Supply 

The  fundamental  tendency  of  all  commerce  is  to  adjust 
itself  to  the  needs  and  desires  of  the  consumers.  Hence 
supply  generally  follows  demand  and  constantly  tends  to 
adjust  itself  to  it.  The  equilibrium  of  demand  and  supply 
is  not  a  frequent  occurrence  and  when  it  does  occur  it  is 
merely  a  temporary  condition.  Generally  speaking,  one  is  as 
fluctuating  as  the  other.  Nevertheless,  whatever  knowl- 
edge one  may  have  of  demand  helps  in  determining  the 
corresponding  data  relative  to  supply;  and  the  extent  and 
quality  of  supply,  under  ordinary  conditions,  give  a  sure  indi- 
cation of  the  extent  and  quality  of  the  existing  demand. 

Tests  of  Supply 

After  obtaining  the  correct  statistical  data  regarding  a 
particular  line  of  product  in  a  given  market,  there  are  three 


DEMAND   AND    SUPPLY  35 

important  qirestions  to   consider  and   determine   relative  to 
supply. 

1.  Are  there  any  signs  of  overproduction  or  of  unused 

supply  ? 

2.  What  is  the  nature  and  quantity  of  local  or  domestic 

supply  ? 

3.  What  are  the   principal   sources  of   foreign   supply, 

and  what  is  the  extent  and  quality  of  each?  That 
is  to  say,  how  much  of  a  given  product  does  the 
country  under  consideration  import  from  other 
countries,  and  how  does  the  quantity — and  the 
quality — imported  from  each  country  vary? 

Overproduction 

Whenever  there  is  an  overproduction  in  a  certain  line  it 
is  followed  by  an  immediate  depression  in  the  market  which 
is  felt  by  everyone  interested  in  that  line.  The  existence  of 
overproduction  can  be  determined  by  mere  casual  inquiry. 

Unused  supply  or  an  overstocked  market  may  exist  when- 
ever there  is  a  temporary  strain  upon  it,  caused  by  local 
conditions.  A  general  financial  depression,  poor  crops, 
changes  in  the  utility  assigned  to  a  commodity  by  its  intended 
purchasers,  the  rise  of  substitutes,  or  any  simj'lar  phenomena 
may  prevent  immediate  absorbtion  of  production  by  the  local 
market.  Care  must  be  exercised  to  differentiate  between  the 
permanent  and  the  temporary  condition.  Above  all,  one  must 
be  careful  not  to  mistake  the  signs  of  a  temporarily  over- 
stocked market  for  the  results  of  overproduction.  In  every 
case  there  must  be  a  careful  investigation  of  the  causes. 

Overproduction  always  has  its  source  in  the  increased 
activity  of  capital  and  labor.  Most  often  it  is  due  to  too 
much  idle  capital.  On  the  other  hand,  unused  supply  is 
generally  caused  by  a  decrease  in  the  income  of  the  people, 
just  as  the  price  of  a  commodity  which  the  public  is  willing 


2,6  GENERAL    CONSIDERATIONS 

to  pay  for  depends  in  a  measure  on  the  amount  of  money  it 
has  to  spend. 

Unused  supply,  hke  overproduction,  needs  no  laborious 
investigation  to  determine  its  existence.  Everyone  in  the 
market  feels  it  and  has  his  theory.  The  only  point  to  empha- 
size is  the  danger  of  mistaking  a  temporary  phenomenon  for 
a  permanent  one.  A  temporary  oversupply  should  not 
frighten  one  from  the  market,  but  reliable  evidence  of  over- 
production or  of  a  chronic  failure  of  the  market  to  absorb 
the  supply  should  be  the  signal  to  withdraw. 

Domestic  Supply 

The  determination  of  the  nature  and  quality  of  domestic 
supply  is  similar  to  that  of  demand.  But  it  is  not  enough 
to  obtain  figures  as  to  the  grade  of  a  particular  kind  of  goods 
on  the  market  and  to  have  at  hand  the  statistical  informa- 
tion as  to  supply.  The  large-scale  exporter  should  have  an 
intimate  knowledge  of  the  character  of  the  domestic  supply, 
such  as  can  only  be  gained  by  careful  personal  examination 
and  notations  of  the  different  grades. 

Foreign  Supply 

The  exact  determination  of  the  original  sources  of  supply 
in  any  given  foreign  country  is  in  some  of  its  aspects  a  very 
difficult  problem.  For  practical  purposes,  however,  it  is  neces- 
sary only  to  find  out  the  extent  of  each  foreign  supply,  because 
the  principal  channels,  like  those  of  overproduction,  are  gen- 
erally known  and  easily  ascertained.  The  quality  of  each 
grade  in  the  market  must  be  determined  by  a  personal 
examination  of  samples. 

In  some  cases  it  is  advisable  and  even  necessary  to  find 
out  what  quantities  or  to  what  extent  a  particular  country 
contributes  to  the  supply  of  the  market.  Such  information 
is  not  always  possible  to  secure  because  of  the  fact — already 


DEMAND   AND    SUPPLY  37 

noted — that  every  nation  engaged  extensively  in  foreign  trade, 
particularly  in  imports,  buys  a  large  amount  of  foreign  prod- 
ucts not  for  domestic  use  but  for  export  into  other  countries. 
Statistical  data  therefore  are  of  no  great  value  in  such  cases, 
and  only  personal  investigation  can  avail.  Information  of 
this  character  can  usually  be  secured  from  the  dealers  of  the 
country  in  which  one  is  interested.  Sometimes  it  is  more 
practical  for  this  purpose  to  go  among  the  exporters  of  the 
competitor  nations. 

The  quality  of  goods  of  a  trader's  principal  foreign  com- 
petitor should  be  studied  preferably  in  the  competitor's  home 
markets,  because  the  quality  supplied  abroad  may  be  and 
often  is  adjusted  to  meet  foreign  requirements;  whereas  the 
quality  in  home  markets  is  more  stationary  and  standardized. 

Price  and  Quality 

The  price  alone  at  which  an  article  is  sold  should  not 
frighten  the  trader  from  a  market  if  he  can  supply  the  grade 
which  is  more  desirable  to  the  consumer.  There  may  be  a 
plentiful  supply  of  pumps,  for  instance,  but  their  quality  may 
be  generally  defective  though  the  prices  are  low.  Poor  pumps 
are  better  than  none ;  but  if  one  can  improve  upon  the  quality 
he  can  charge  more  for  his  pumps  and  will  be  able  to  make 
sales  by  demonstrating  that  the  user  would  profit  more  by 
paying  a  higher  price  for  a  pump  that  does  the  work  than  by 
buying  a  cheaper  article  liable  to  break  down  and  wear  out 
rapidly. 

Conclusion 

There  are  certain  principles  underlying  both  demand  and 
supply  which  the  exporter  must  have  constantly  in  mind.  His 
attempts  to  gauge  the  character  of  either  element  should  be 
based  largely  on  statistical  data  checked  and  confirmed  by  an 
investigation  of  the  ground.     He  should  avoid  generalization 


119483 


38  GENERAL   CONSIDERATIONS 

and  apply  his  tests  to  each  market  and  to  each  product.  He 
should  go  beneath  the  surface  and  consider  potentialities  as 
well  as  actualities.  He  must  be  able  to  distinguish  between 
overproduction  and  an  overstocked  market,  avoiding  the  one 
and  taking  his  chances  with  the  other.  He  should  familiarize 
himself  with  the  quality  as  well  as  the  quantity  of  the  supply 
of  his  products  both  from  local  and  foreign  sources,  but  he 
must  remember  that  neither  source  gives  a  conclusive  measure 
of  the  actual  demand. 

It  is  well  to  know  whether  the  supply  or  demand  is  in- 
creasing or  diminishing,  whether  it  is  elastic  or  more  or  less 
stationary.  If  the  demand  is  steadily  decreasing  there  may 
be  a  reason  which,  if  ascertained,  would  make  it  wise  to  keep 
out  of  the  market.  A  selling  campaign  cannot  be  prosecuted 
with  certainty  of  success  in  a  territory  where  no  definite  data 
are  available  as  to  the  volume,  nature,  and  quality  of  demand 
and  supply.  It  is  always  to  be  remembered  that  the  final 
approximation  of  these  essential  elements  is  best  fixed  by 
personal  investigation.  In  the  case  of  demand  the  investiga- 
tion must  be  conducted  in  the  market  itself;  in  the  case  of 
supply,  in  the  countries  from  which  emanate  the  main  currents 
of  supply.  If  the  trader's  chief  competitor  is  England  he  must 
go  first  to  England  for  the  basic  information,  and  if  the  data 
secured  there  does  not  deter  him  from  his  purpose,  he  must 
then  go  into  the  market  he  desires  and  there  complete  his 
information.  Only  when  this  mass  of  information  is  embodied 
in  his  chart  is  he  ready  to  proceed  with  extended  effort. 


CHAPTER   VI 

THE  PSYCHOLOGY  OF  THE  FOREIGN  MARKET 

Basic  Principles 

It  is  difficult  to  outline  any  definite  procedure  for  the  inves- 
tigation of  the  structure  and  psychology  of  the  foreign  market. 
From  their  nature,  psychology  and  structure  are  closely  inter- 
woven; each  reacts  on  the  other.  Both  elements  vary  in  dif- 
ferent countries  and  even  in  the  different  markets  of  the  same 
country  to  the  extent  that  the  history,  the  temperament,  and 
civilization  of  the  peoples  vary.  The  domestic  market  is  com- 
paratively homogeneous,  but  abroad  heterogeneity  is  the  rule. 
Here  is  one  of  the  difficulties  that  the  investigator  must  antici- 
pate. 

In  his  study  perhaps  the  first  essential  is  to  avoid  either 
generalizing  or  judging  one  market  by  another;  to  learn  to 
discriminate  between  facts  and  fancies,  realities  and  illusions, 
apparent  and  real  values.  There  are  already  too  many  illu- 
sions— academic,  governmental,  mercantile,  and  financial — 
concerning  the  foreign  field. 

The  foreign  investigator  may  never  be  able  to  achieve  the 
native's  insight  into  the  wants  of  a  people  or  his  intuitive 
knowledge  of  their  standards  and  mental  processes.  The  best 
that  the  foreign  observer  can  do  is  to  live  with  the  people  of 
his  prospective  market  until  he  has  absorbed  their  psychology 
and  has  a  real  understanding  of  the  structure  of  their  market 
and  of  their  ways  of  doing  business.  There  are,  however, 
certain  fundamental  economic  doctrines  which  he  should  have 
in  mind  because  of  their  particular  bearing  upon  the  develop- 
ment of  foreign  trades. 

39 


40  GENERAL    CONSIDERATIONS 

Commodities  Pay  for  Commodities 

Commodities  pay  for  commodities  or  exports  for  imports, 
and  in  tlie  commercial  dealings  between  nations  only  a  small 
balance  is  settled  by  the  payment  of  precious  metal. 

The  general  tendency  is  to  exchange  the  produce  of  one 
country  for  that  of  other  countries  at  such  value  that  the  sum 
of  a  country's  exports  shall  pay  for  the  sum  of  its  imports. 
Here,  however,  it  should  be  remembered,  first,  that  although 
we  may  speak  of  debts  between  nations,  as  for  instance  the 
indebtedness  of  France  to  the  United  States,  this  is  merely  a 
convenience  of  speech.  In  reality  the  debt,  save  in  such 
exceptional  cases  as  the  direct  war  loans  of  the  Entente  Pow- 
ers, is  not  of  one  state  to  the  other,  but  of  a  multitude  of 
Frenchmen,  for  instance,  to  a  multitude  of  Americans.  Such 
expressions  as  "international  indebtedness,"  or  "balance  of 
indebtedness,"  in  favor  of  or  against  a  country,  mean  simply 
the  balance  of  a  mass  of  individual  accounts. 

Secondly,  it  should  be  borne  in  mind  that  when  we  speak 
of  the  "balance  of  trade"  this  phrase  also  is  largely  a  figure  of 
speech.  In  reality,  the  so-called  balance  of  trade  is  a  delusion. 
In  the  first  place,  it  is  difficult,  if  not  impossible,  to  ascertain 
with  any  accuracy  the  exact  relationship  between  exports  and 
imports.  When  there  is  a  long  frontier  it  is  well-nigh  impos- 
sible to  include  in  the  estimate  everything  that  passes  over  the 
border.  There  is  also  no  rule  of  uniformity  in  the  method 
of  calculating  the  values — whether  values  should  be  calculated 
at  the  place  of  export  or  import,  and  whether  the  cost  of  trans- 
portation should  or  should  not  be  included. 

But  even  if  every  article  could  be  definitely  and  honestly 
recorded  on  the  "balance  sheet,"  the  statistics  themselves 
would  need  f'-.rther  interpretation.  As  has  been  noted,  while 
some  European  countries  habitually  import  more  than  they 
export,  a  considerable  part  of  their  imports  is  used  for  export. 
This  the  governmental  statistics  do  not  usually  show. 


THE   PSYCHOLOGY   OF  THE   FOREIGN    MARKET       41 

Commerce  Rests  Upon  Comparative  Needs  and  Supplies 

A  second  fundamental  economic  doctrine  is  that  interna- 
tional commerce  rests  upon  the  comparative  needs  and  supplies 
of  the  trading  countries,  or  to  use  the  technical  expression,  on 
the  conditions  of  comparative  cost. 

A  simple  illustration  of  comparative  cost  may  be  found  in 
the  case  of  a  mechanical  engineer  who  employs  a  man  to 
care  for  his  furnace.  He  could  save  this  money  by  attending 
to  his  furnace  himself,  yet  he  prefers  to  leave  the  furnace  in 
charge  of  the  man,  because  it  pays  better  in  the  end  for  him 
to  attend  to  his  technical  business  and  leave  the  furnace  in 
charge  of  someone  else.  He  gains  in  that  way  more  than  he 
loses. 

In  this  law  of  comparative  costs  and  of  reciprocal  demands 
lies  to  a  great  extent  the  explanation  of  the  phenomenon  of 
foreign  trade.  In  applying  this  law,  however,  and  in  studying 
the  actual  effects  of  foreign  trade  in  any  particular  country,  it 
is  necessary  to  consider  that  country  independently  of  the  rest 
of  the  commercial  world,  otherwise  one  is  apt  to  arrive  at  an 
erroneous  conclusion.  Whether  or  not  France  sends  any  silk 
to  Russia,  and  the  quantity  she  may  send,  depends  upon  the 
prices  obtainable  in  other  countries.  These  prices,  in  turn, 
depend  upon  the  causes,  both  general  and  special,  which  oper- 
ate throughout  the  commercial  world.  In  other  words,  the 
markets  of  the  world  are  interdependent,  and  the  collective 
influence  of  all  effects  the  prices  in  each  particular  locality  or 
market.  This  fact  must  never  be  forgotten  in  studying  the 
prices  and  other  conditions  in  any  market. 

The  growth  of  wealth  and  population  increases  the  quality 
and  quantity  of  demand,  and  the  growth  of  labor  and  capital 
increases  the  supply.  The  changes  in  the  conditions  of  supply 
are  usually  the  changes  in  the  rates  of  wages  and  in  the  pro- 
portionate increase  of  profits,  which  are  the  universal  elements 
in  the  cost  of  production. 


42 


GENERAL    CONSIDERATIONS 


When  foreign  goods  sold  in  home  markets  are  of  a  kind 
which  can  be  produced  at  home,  it  shows  that  either  the  foreign 
goods  are  cheaper  or  else  the  home  producers  did  not  produce 
the  quantity  or  kind  needed.  When  the  foreign  force  of 
supply  has  spent  itself  and  competition  sets  in,  the  profits  tend 
to  vanish  and  the  greater  the  competition  the  more  fluctuating 
will  be  the  price.  In  a  highly  organized  market  the  prices  for 
the  same  commodity  are  more  uniform;  in  a  primitive  or  dis- 
organized market  there  is  always  a  marked  variation  of  price 
for  practically  the  same  commodity. 

Conditions  of  Society  Determine  Status  of  Market 

A  third  fundamental  maxim  of  foreign  trade  is  that  the 
conditions  of  society  in  a  given  country  are  the  most  influential 
factor  in  determining  the  status  of  the  market  in  that  country. 
For  this  reason  one  cannot  correctly  pass  upon  a  trade  situation 
in  any  one  country  without  a  painstaking  and  careful  study  of 
the  political,  economic,  and  social  forces  which  operate  there 
and  which  translate  into  commercial  forces  the  feelings  of  the 
individuals  who  compose  these  social  groups.  A  knowledge  of 
conditions  in  a  given  country  is  indispensable  to  commercial 
success  therein.  The  need  of  studying  the  market's  psychology 
and  structure,  therefore,  is  manifest. 

While  the  determining  factor  of  trade  is  the  rate  of  profit 
obtained,  the  basis  for  the  demand  for  an  article  is  the  utility 
assigned  thereto.  Estimates  cf  utility  may  change  according 
to  changes  in  fashion,  education,  morality,  or  law,  and  it  is 
necessary  to  he  constantly  in  touch  with  the  varying  conditions 
in  the  trading  country  including  not  only  the  prevailing  cus- 
toms but  the  commercial  ethics  of  the  community  as  well. 

Structure  of  the  Market 

It  should  be  clear  that  anyone  venturing  into  the  foreign 
field  must  give  close  study  to  the  organization  and  structure  of 


THE   PSYCHOLOGY   OF   THE    FOREIGN    MARKET        43 

each  particular  market;  that  he  must  learn  what  classes  of 
dealers  can  handle  his  goods  to  advantage,  and  know  the  func- 
tion and  characteristics  of  each  class. 

One  important  difference  between  foreign  and  domestic 
trade  is  that  in  foreign  trade  it  is  for  the  most  part  the  dealer, 
not  the  consumer,  who  originates  the  demand.  For  this  reason 
the  dealer — and  with  him  should  be  included  the  commission 
man  and  the  jobber — is  a  far  more  important  trade  factor  in 
foreign  than  in  domestic  trade.  At  home  the  consumer  will 
generally  buy  the  article  which  is  well  advertised ;  abroad  the 
dealer  is  usually  the  chief  factor  in  the  introduction  as  well  as 
in  the  distribution  of  new  merchandise.  He  is  the  local  mis- 
sionary of  the  world's  trade,  and  the  medium  through  which 
the  consumer  is  educated  in  the  value  of  a  new  or  a  different 
kind  of  merchandise.  It  is  sometimes  well  for  the  exporter 
who  cannot  undertake  an  expensive  campaign  for  the  introduc- 
tion of  his  goods,  to  make  arrangements  with  the  local  jobber 
in  the  foreign  country  whereby  he  assumes  the  expense. 

There  are  many  strange  details  of  commercial  structure. 
In  China,  for  example,  foreign  business  is  transacted  exclu- 
sively through  a  third  party  called  a  fostook  or  comprador, 
who  is  a  relic  of  the  old  olio  or  hong  custom,  and  who  is  a 
character  that  enters  into  every  possible  phase  of  life  in  China,  y 
He  is  the  most  important  person  for  an  importer  or  an  exporter 
to  know,  for  he  takes  the  place  of  the  commercial  traveler, 
buyer,  advertising  agent,  credit  man — in  fact,  he  does  every- 
thing. His  connections  and  his  influence  with  local  merchants 
are  unlimited,  which  makes  him  the  controlling  lever  in  the 
trade  of  China  where  precedent  and  superstition  are  still 
inseparable  elements  in  commercial  as  well  as  in  social  life. 

Psychology  of  the  Market 

Perhaps  the  most  important  element  of  the  psychology  of 
the  market  is  the  attitude  of  the  peoples  or  the  governments  of 


44  GENERAL   CONSIDERATIONb 

two  trading  countries  toward  each  other.  Nearly  every  coun- 
try has  certain  favored  nations  with  which  it  prefers  to  trade. 
The  reasons  for  this  distinction  are  numerous  and  sometimes 
very  compHcated — tradition,  similarity  of  language,  long-last- 
ing political  friendship,  religious  kinship.  These  factors, 
which  scarcely  enter  into  domestic  commerce,  where  he  who 
has  the  best  goods  and  the  lowest  prices  generally  wins,  play 
an  important  part  in  international  trade. 

In  every  country,  trade  is  to  a  great  extent  regulated  by 
financial  interests.  If  the  people  of  one  nation  have  large 
investments  in  a  certain  foreign  country,  their  financial  hier- 
archy comes  in  close  touch  with  that  country's  banking  and 
other  moneyed  interests.  These  influences  stimulate  the  exten- 
sion of  trade  between  the  two  countries  because  both  are 
greatly  benefited  thereby.  Since  all  trade  is  a  mere  exchange 
of  commodities,  one  kind  paying  for  another,  the  people  who 
buy  much  will  also  sell  much.  Ships  cannot  afford  to  go  out 
full  to  come  back  empty. 

Reciprocity  Significant 

Reciprocity  is,  of  course,  significant  in  the  psychology 
of  foreign  trade.  The  people  who  think  only  of  their  own 
side  of  life  never  get  very  far  in  international  dealings.  As  a 
rule  a  man  is  more  wary  of  a  foreigner  than  he  is  of  a  person 
of  his  own  nationality;  and  he  is  likely  to  scrutinize  every  act 
of  a  foreigner  who  seeks  business  connections  with  him. 
Neither  is  he  ever  slow  to  note  any  mercenary  propensities.  It 
is  most  important  to  bear  in  mind  that  he  who  takes  must  also 
be  able  to  give,  for  one  cannot  get  something  for  nothing  if 
that  something  is  worth  having.  A  foreign  customer  must  be 
treated  with  at  least  as  much  consideration  as  the  domestic 
customer.  To  consider  only  the  immediate  and  narrow  per- 
sonal advantage  is  absurd  and  never  pays  in  the  end.  Every 
nation  has  its  susceptibilities.    Nations  have  the  same  likes  and 


THE   PSYCHOLOGY    OF   THE    FOREIGN    MARKET        45 

dislikes  as  individuals  and  the  trader  must  learn  them.  The 
admiration  or  sympathy  of  the  people  of  one  nation  for  the 
people  of  another  is  a  great  commercial  advantage.  So  is 
national  prestige. 

The  theory  that  foreign  trade  is  the  result  of  differences  in 
comparative  cost  is  limited  in  its  application  by  various  hin- 
drances to  trade  and  by  the  competition  of  different  countries. 
On  the  other  hand,  the  differences  between  foreign  and  domes- 
tic trade  should  not  be  too  much  emphasized.  Unless  it  is 
clearly  perceived  that  the  movement  toward  an  increase  of 
trade  relations  between  nations  is  accounted  for  in  the  same 
way  as  the  growth  of  domestic  trade,  serious  mistakes  are 
likely  to  be  made  in  interpreting  the  facts  in  foreign  trading 
and  in  judging  matters  of  commercial  policy. 

Civilizing  Influences  of  International  Trade 

International  trade  has  great  humanitarian,  political,  edu- 
cational, and  social,  as  well  as  commercial  aspects,  for  the 
more  it  is  developed  the  more  closely  will  the  nations  become 
knit  together  and  the  more  alike  will  be  their  civilizations  and 
their  ideas.  As  time  goes  on,  the  conditions  of  international 
trade  will  resemble  more  and  more  the  trade  conditions  exist- 
ing within  the  principal  civilized  countries.  If  the  world  is 
ever  to  become  a  federation  of  states  devoted  to  the  pursuit  of 
peace  and  happiness  it  will  be  largely  due  to  the  development 
of  international  commerce,  through  the  basic  understanding  of 
nation  by  nation  and  the  vigorous,  healthy  interchange  of 
markets,  resulting  in  international  structural  growth. 


CHAPTER   VII 

THE  STATUS  OF  THE  FOREIGN  MARKET 

Knowledge  of  General  Conditions 

The  exporter's  study  of  his  prospective  market  cannot  be 
considered  complete  until  he  has  investigated  the  conditions 
which  surround  it.  He  must  know  not  only  the  details  of 
supply  and  demand  and  the  general  points  of  structure,  but 
also  the  status  of  the  market  both  within  and  without  its  own 
country.    The  principal  lines  of  study  are  the  following: 

1.  The  political  status 

2.  The  governmental  status 

3.  The  legal  status 

4.  The  economic  status 

5.  The  financial  status 

6.  The  social  status 

7.  The  commercial  status 

The  Political  Status 

The  political  status  of  a  market  has  two  aspects — the 
international  and  the  domestic. 

To  understand  the  international  status  the  prospective 
trader  must  determine  the  state  of  cordiality  existing  between 
his  country  and  the  country  with  which  he  proposes  to  trade. 
On  this  point  the  information  can  be  secured  from  the  Depart- 
ment of  State.  He  should  examine  the  treaty  rights  to  find 
whether  or  not  they  contain  the  "favored  nation"  clause. 
Most  important  of  all  are  the  tariff  schedules,  so  far  as  they 
refer  to  his  products.  If  the  schedules  are  very  high  he  may 
well  consider  whether  or  not  they  are  prohibitive. 

46 


STATUS   OF   THE   FOREIGN    MARKET  47 

There  are  several  kinds  of  international  complications  the 
existence  of  which — if  they  do  exist — should  be  determined 
before  the  exporter  ventures  into  the  new  field. 

For  instance,  there  may  be  a  reciprocal  arrangement  with 
some  other  country  by  virtue  of  which  the  country  under 
investigation  levies  no  import  duties  on  certain  articles  sup- 
plied by  the  preferred  nation.  Should  the  exporter  find  his 
products  in  the  list  of  such  articles  he  may  decide  to  withdraw 
rather  than  try  to  compete  under  the  handicap  of  an  import 
duty  which  is  not  paid  by  the  preferred  nation. 

The  internal  political  situation  of  the  country  is  always 
deserving  of  study  and  has  an  important  bearing  upon  busi- 
ness conditions.  If  the  government  is  stable  and  if  there  is 
intelligent  and  friendly  co-operation  between  political  parties, 
the  conditions  may  be  considered  favorable.  If  the  political 
atmosphere  is  highly  charged  and  the  stability  of  the  govern- 
ment is  doubtful,  the  conditions  for  the  establishment  of  any 
permanent  business  are  far  from  favorable. 

One  should  learn  something  about  the  political  structure 
of  the  foreign  country  and  its  bearing  upon  trade  in  general 
and  international  commerce  in  particular.  Especially  should 
the  exporter  decide  whether  or  not  political  conditions  or  con- 
tingencies can  affect  his  business,  and  if  they  can,  how  and 
to  what  extent.  Generally  speaking,  an  international  trader 
must  acquire  an  intimate  knowledge  of  such  conditions  per- 
taining to  or  prevailing  in  the  country  in  which  he  is  to  seek 
trade. 

The  study  of  the  political  status  of  a  nation  should  include 
a  study  of  its  institutions.  The  observer  should  learn  the 
degree  of  religious  toleration.  If  there  are  privileged  classes 
he  should  know  their  attitude  toward  the  common  people. 
All  this  may  be  of  great  importance  to  the  trader  in  his  par- 
ticular line.  In  Russia,  for  example,  semipolitical,  co-opera- 
tive associations  called  "Zemstvos"  are  an  important  factor 


48  GENERAL   CONSIDERATIONS 

in  the  commercial  life  of  the  country  inasmuch  as  all  of  them 
give  close  study  to  various  Hnes  of  products,  especially  agri- 
cultural lines,  and  to  a  great  extent  make  or  influence  the  pur- 
chases for  the  community  over  which  they  preside. 

If  any  countries  still  retain  censorship,  it  is  well  to 
know  what  formalities  one  must  be  prepared  to  undergo  be- 
fore distributing  commercial  Hterature,  such  as  catalogues 
and  general  advertising  material. 

The  Governmental  Status 

Every  government  is  a  purchaser  of  certain  commodities 
to  a  greater  or  lesser  extent,  and  some  governments  are  very 
large  buyers.  It  is  well,  therefore,  "to  know  the  ropes." 
This  not  only  means  that  one  should  learn  what  official  or 
officials  to  approach  in  order  to  sell  or  buy  from  the  govern- 
ment ;  it  means  also  that  one  must  know  the  character,  habits, 
usages,  temperaments,  and  tendencies  of  the  officials  in  a 
particular  country  so  as  to  deal  with  them  successfully. 

The  government  of  every  country  has  its  distinct  political 
structure  as  well  as  the  usual  legal  functions.  It  is  advisable  to 
know  both  in  a  general  way,  and  to  be  familiar  with  their 
policies.  If,  for  instance,  one  is  interested  in  the  sale  of  motor 
vehicles,  it  might  be  well  to  know  beforehand  whether  it  is  the 
policy  of  the  local  governments  to  build  good  roads  and  to  tax 
passenger  cars.  If  one  is  interested  in  the  sale  of  agricultural 
machinery,  he  should  know  how  much  encouragement  the  gov- 
ernment affords  to  the  agricultural  interests  of  the  country. 

The  Legal  Status 

Upon  the  laws  of  the  country  rests  the  security  of  com- 
merce. If  the  laws  are  bad,  business  is  likely  to  be  bad. 
Every  exporter  to  be  thorough  and  scientific  in  his  foreign 
trade  should  familiarize  himself  with  the  fundamental  legal 
requirements  which  relate  to  his  business  in  the  country  with 


STATUS   OF   THE   FOREIGN    MARKET  49 

which  he  proposes  to  trade — especially  those  legal  principles 
with  which  he  is  or  will  be  obliged  to  come  in  contact  every 
day.  He  who  makes  a  bill,  a  note,  or  a  draft,  should  know 
something  of  the  commercial  laws  involved — whether  protest 
is  required  or  not  and  within  what  time  after  maturity  the 
note  must  be  presented  for  payment.  In  some  countries  the 
principal  is  responsible  for  all  the  business  acts  of  his  agent; 
in  other  countries  the  registration  of  all  business  concerns  is 
required  under  severe  penalties.  Some  countries  demand  a 
license  from  commercial  travelers.  There  are  different  laws 
regarding  partnerships  and  different  requirements  governing 
corporations.  No  knowledge  connected  with  international 
trade  is  complete  without  some  knowledge  of  the  commercial 
law  of  the  country  with  which  one  has  or  expects  to  have 
constant  business  dealings.  Yet  there  is  no  knowledge  which 
is  more  neglected,  because  many  people  have  not  yet  learned 
that  an  ounce  of  prevention  is  worth  a  pound  of  cure. 

The  Economic  Status 

As  international  trade  is  based  upon  the  exchange  of  com- 
modities, a  country  which  produces  nothing  of  value  for  ex- 
port, cannot  be  of  great  value  as  an  importing  country.  It  is 
advisable  to  know  the  principal  sources  of  the  wealth  of  the 
country,  as  such  information  will  not  only  help  to  approximate 
the  value  of  the  field  as  a  trading  center,  but  it  will  also  assist 
in  estimating  correctly  the  demand  for  any  particular  product. 

The  knowledge  of  the  economic  conditions  of  the  country 
and  its  people  may  likewise  be  obtained  through  the  study  of 
labor  conditions.  The  prevailing  scale  of  wages,  the  number 
of  men  employed  in  various  lines  of  enterprise,  the  degree  of 
thrift  as  shown  by  savings  and  bank  statistics  (though  in 
Russia  and  China  people  do  not  usually  keep  their  savings  in 
banks),  the  number  of  paupers  and  unemployed — all  these  are 
important.     One  should  learn  the  nature  and  the  number  of 


50  GENERAL   CONSIDERATIONS 

industries  and  the  amount  of  capital  invested  in  such  enter- 
prises. He  should  know  also  the  state  of  the  distribution  of 
wealth,  the  amount  per  capita,  and  the  principal  sources  of 
national  wealth.  This  is  purely  statistical  data,  easily  obtain- 
able. 

The  Financial  Status 

The  exporter  should  know  beforehand  if  there  is  much 
governmental  interference  in  trade,  if  money  has  an  inflated 
value,  if  the  banks  are  poorly  regulated  and  unsafe,  if  panics 
are  frequent — in  short,  if  a  country  is  unsound  financially. 
The  only  safe  method  of  trading  in  such  circumstances  is — 
cash  in  advance. 

The  commonest  sources  of  statistical  information  will 
show  the  value  of  a  country's  currency,  its  revenues,  the 
amount  of  national  debt,  whether  the  interest  is  being  paid  or 
not,  the  extent  of  the  banking  business,  and  the  value  of 
weights  and  measures — all  of  which  are  good  indicators  of 
the  degree  of  financial  stability. 

Gold  and  credit  substitutes  for  gold,  which  in  normal  times 
are  accepted  with  equal  readiness,  like  other  commodities,  are 
sent  to  the  dearest  market.  The  dearest  market  for  gold  or 
money  is  not  the  market  where  the  prices  of  commodities  are 
the  lowest,  or  the  exchange  value  of  gold  is  the  highest,  but 
where  the  rate  of  interest  is  the  highest. 

The  ordinary  fluctuation  of  the  foreign  exchanges  about 
the  gold  par  affect  foreign  trade  only  indirectly  on  the  ad- 
verse balance  of  indebtedness,  but  it  may  affect  the  exchanges 
directly  and  effectively  by  raising  the  rate  of  discounts. 
Countries  of  different  monetary  standards  in  which  there  is 
no  limit  to  fluctuations  may  present  a  serious  situation  in  hard 
times. 

As  a  general  rule,  it  is  better  to  leave  questions  pertaining 
to  the  currency  problem  and  exchange  to  the  judgment  of 


STATUS   OF  THE   FOREIGN    MARKET  51 

the  bankers.  From  them  one  can  also  ascertain  whether  or 
not  the  financial  conditions  in  the  country  are  sound,  and  war- 
rant the  trade. 

The  Social  Status 

A  person  who  knows  nothing  of  the  ways  of  the  people 
with  whom  he  proposes  to  deal,  their  manner  of  living,  and 
their  temperament,  cannot  succeed  as  a  business  man  among 
them,  and  is  certainly  not  qualified  to  draw  plans  for  a  com- 
mercial campaign. 

There  will  always  be  those  who  think  they  can  go  into 
a  foreign  country  and  do  business  on  their  own  terms  and  in 
their  own  way,  but  the  international  business  man  must  learn, 
first  of  all,  that  he  cannot  change  the  habits,  customs,  and 
methods  of  the  people  with  whom  he  is  coming  to  trade,  and 
that  he  must  adapt  himself  to  their  particular  civilization. 
The  closer  he  gets  to  them  and  the  more  in  sympathy  he  is 
with  them,  the  greater  will  be  his  chances  of  success.  To  be 
successful  he  must  first  know  how  to  make  himself  liked. 

Much  is  said  about  national  susceptibilities  and  racial 
characteristics.  They  must  be  studied  separately  in  each  case. 
Broadly  speaking  the  races  may  be  divided  into  three  cate- 
gories, according  to  their  temperaments.  These  classes  may 
be  called:  the  emotional,  the  phlegmatic,  and  the  eccentric. 

To  the  emotional  group  belong  all  the  South  American 
and  other  Latin  races,  and  the  Slavs,  including  the  Russians 
and  Poles,  Czechs,  Jugoslavs,  Serbians,  Bulgarians,  Croatians, 
and  Ukrainians.  These  people  are  exceedingly  sensitive  and 
prompt  to  take  offence  if  not  handled  tactfully.  As  a  rule, 
they  are  ready  to  forego  business  advantages  if  they  feel  that 
they  are  not  approached  or  treated  properly. 

The  principal  peoples  of  the  phlegmatic  class  are  the 
British  and  the  inhabitants  of  the  United  States.  These 
peoples  are  not  so  particular  as  to  how  they  are  treated  so 


52 


GENERAL    CONSIDERATIONS 


long  as  they  gain  a  commercial  or  financial  advantage.  They 
do  not  relish  an  insult,  but  they  are  ready  to  overlook  it  if  it 
should  seem  to  them  good  business  policy  to  do  so. 

In  the  class  of  eccentrics  might  be  placed  the  Oriental 
races.  These  people  may  be  said  to  possess  a  mixed  tempera- 
ment. They  frequently  have  the  qualities  of  both  the  phleg- 
matic and  the  emotional  temperaments.  They  are  eccentric 
only  when  one  tries  to  get  something  out  of  them.  It  is  other- 
wise when  they  are  trying  to  get  something  out  of  someone 
else;  then  there  is  no  limit  to  their  persistence.  Although 
most  of  the  Oriental  races — except  the  Jews,  the  Japanese, 
and  the  Syrians — seem  to  lack  persistence,  it  is  not  that  they 
do  not  possess  this  quality,  but  that  they  do  not  care  enough 
for  money  to  exert  themselves  to  the  utmost  for  its  acquire- 
ment. 

In  cases  where  one  is  desirous  of  creating  a  demand  for 
a  product  among  a  certain  people,  more  than  a  casual  study 
of  their  characteristics  should  be  undertaken — their  desires, 
their  habits,  and  their  mode  of  living  then  require  close 
attention. 

The  development  of  a  new  demand  Involves  advertising, 
as  well  as  a  close  study  of  national  wealth  and  its  distribution. 
The  press  of  the  country  must  be  studied  and  the  best  mediums 
for  advertising  selected.  In  this  connection  one  should  not 
forget  to  look  up  the  statistics  of  illiteracy.  If  a  large  portion 
of  the  people  cannot  read,  the  advertising  policy  will  have  to 
be  adjusted  to  suit  the  conditions.  Under  such  circumstances 
it  may  be  possible  to  use  posters  and  other  pictorial  appeals  to 
advantage.  The  subject  of  advertising  in  foreign  trade  is 
discussed  In  Chapter  XXX. 

The  Commercial  Status 

The  Investigation  of  the  commercial  status  of  a  country 
concerns  itself  with  the  structure  and  psychology  of  the  for- 


STATUS   OF  THE   FOREIGN   MARKET  53 

eign  market  and  with  all  the  technical  details  which  pertain 
to  it.  It  includes  the  status  of  local  supply  and  demand,  qual- 
ity, prices,  current  rates  of  exchange,  possible  uses  of  the 
article  to  be  sold,  the  purchasing  power  of  money,  the  cost  of 
labor  and  materials,  commercial  customs  and  trade  methods 
pertaining  to  sale,  credits,  demands  and  acceptances,  and  the 
volume,  quality,  and  extent  of  competition  in  a  given  line. 

Under  this  heading  will  come  the  study  of  the  type  of 
organization  adapted  to  business  with  a  particular  country  and 
whether  the  particular  business  should  be  transacted  through 
local  jobbers,  through  agents  and  personal  representatives,  or 
through  branch  offices. 

Every  exporter  realizes  the  necessity  for  the  study  of  the 
commercial  status  of  the  prospective  market,  but  only  a  few 
see  the  value  of  investigating  the  other  conditions  which  have 
been  pointed  out.  The  man  who  is  thorough  in  his  business 
methods  and  who  leaves  undone  nothing  which  should  be 
done,  will  give  to  each  of  the  lines  of  inquiry  here  suggested 
his  best  thought  and  study. 


CHAPTER   VIII 

PRINCIPLES  OF  INTERNATIONAL  DISTRIBUTION 

Factors  of  Distribution 

Any  general  selling  operation  by  which  marketable  goods 
change  ownership  and  pass  into  the  hands  of  a  Cfjnsiderable 
number  of  people  is  called  "distribution"  in  the  commercial 
sense  of  the  word. 

The  distribution  of  commodities  is  an  intricate  subject.  It 
involves  so  many  principles  and  is  so  closely  correlated  with 
every  conceivable  economic  factor  that  it  is  out  of  the  question 
to  con::ider  it  here  in  any  but  its  most  fundamental  aspects 
from  the  standpoint  of  the  producer. 

The  factors  of  distribution  are  many  and  complex.  Among 
them  must  be  included  the  problems  involved  in  moving  the 
commodity  from  the  place  of  production  to  the  ultimate 
consumer,  also  its  storage  in  the  warehouse,  and  the  cost  of 
its  display  in  the  retail  store.  All  the  details  of  its  several 
transfers  of  ownership  until  it  at  last  reaches  the  retail  cus- 
tomer— everything  that  goes  to  make  up  its  selling  cost  which 
of  course  includes  the  cost  of  advertising —  is  properly  charged 
to  distribution. 

The  elements  involved  are  both  physical  and  psychical.  The 
physical  elements  are  relatively  simple ;  the  psychical  are 
involved  and  to  them  are  due  the  complications  that  make 
distribution  so  expensive,  so  difficult,  and  in  a  sense  so 
inefficient. 

The  principles  of  international  distribution  are  the  s^ime 
among  all  peoples  and  among  all  classes  and  conditions  of 
humanity  at  all  places  where  trading  is  carried  on.     On  the 

54 


INTERNATIONAL   DISTRIBUTION 


55 


one  hand  they  are  governed  by  eccnomic  laws  and,  on  the  other 
hand,  they  are  developed  by  the  element  of  fortuity  in  isolated 
cases  and  among  individual  traders. 

Distribution  and  Trade  Channels 

Nevertheless,  distribution  in  the  last  analysis  can  be  most 
successfully  accomplished  through  the  regular  trade  channels. 

The  domestic  channels  of  distribution  for  the  American 
manufacturer  are  illustrated  in  the  following  diagram: 


Manufacturer 


Commission 
Agent 


Consumer 


Retailer 


Wholesaler 
~1 


Retailer 


Consumer 


I 


Consumer 


Chart  Showing  Domestic  Channels  of  Distribution 

It  is  obvious  that  the  more  intermediaries  there  are  inter- 
vening between  the  manufacturer  and  the  consumer,  the 
greater  the  cost  of  distribution. 

Intermediaries  in  Foreign  Trade 

In  foreign  trade  the  intermediaries  are,  of  course,  greatly 
increased.  The  accompanying  diagram  illustrates  the  chief 
factors  of  distribution  and  their  various  auxiliaries  involved 
in  the  process  of  transferring  a  commodity  from  the  producer 
in  one  country  to  the  ultimate  consumer  in  another. 

It  will  be  seen  that  seven  groups  of  factors  intervene 
between  the  producer,  I,  and  the  consumer,  VIII.  Groups  II 
and  III  represent  two  general  types  of  collectors;  IV,  V,  the 


56 


GENEFL\L   CONSIDERATIONS 


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INTERNATIONAL   DISTRIBUTION  57 

foreign  trade  intermediaries ;  and  VI  and  VII,  the  distributing 
trade  in  the  importing  country. 

The  traders  are  of  two  classes,  those  who  assume  title  to  a 
commodity,  buying  and  selling  it  at  a  profit,  and  those  who 
sell  only  their  services.  The  latter  factors  owe  their  existence 
to  their  co-operative  efforts  and  to  the  benefits  they  confer. 
Only  when  they  cease  to  be  worth  what  they  cost  will  they 
be  eliminated.  Direct  importing  and  co-operative  methods 
may  reduce  their  number  somewhat,  but  in  the  meantime  their 
presence  is  felt  in  the  increased  cost  of  the  commodity. 

Fixing  the  Price 

It  is  evident  that  the  selling  price  abroad  must  reflect 
the  greatly  increased  cost  of  distribution.  Selling  cost  has 
been  estimated  as  averaging  from  20  to  35  per  cent  more 
abroad  than  at  home  when  the  same  method  is  followed.  Even 
under  the  general  merchandising  plan  the  increased  selling  cost 
is  still  much  higher.  In  fixing  the  retail  export  price  the 
exporter  must  know  his  own  costs  and  must  allow  himself  a 
fair  profit. 

Generally  his  price  will  be  higher  than  his  European 
competitor's,  but  that  need  not  necessarily  exclude  him  from 
the  market.  A  high  price  will  always  connote  a  superior 
article  in  the  mind  of  the  consumer.  A  slight  difference  in 
cost  is  not  such  an  important  element  to  the  man  who  has  also 
to  consider  the  difference  in  transportation  charges,  the  quality 
of  the  product  and  possibly  export  duties  as  well.  There  are 
other  ways  of  offsetting  price  differences  and,  as  will  be 
pointed  out  in  Chapter  XXXII,  cost  is  not  always  the  deter- 
mining factor  in  effecting  a  sale. 

Comparative  Costs 

Individuals  find  it  most  profitable  to  confine  themselves 
to  their  particular  functions  and  to  have  someone  else  do  the 


^3      '  GENERAL   CONSIDERATIONS 

less  productive  work.  The  exporter  may  himself  be  an  expert 
packer,  but  he  will  make  more  money  if  he  spends  all  his 
time  in  directing  his  business  and  leaves  the  work  of  packing 
to  a  moderately  paid  subordinate.  So  it  is  with  nations.  If 
in  Spain  it  costs  ten  times  as  much  to  produce  a  barrel  of  flour 
as  a  yard  of  cloth,  while  in  America  it  costs  but  six  times  as 
much,  it  is  to  the  advantage  of  the  Spaniard  to  confine  himself 
to  making  cloth  and  to  purchase  his  flour  from  America.  So 
long  as  the  comparative  costs  of  producing  goods  vary  among 
the  different  nations  of  the  world,  so  long  will  there  be  inter- 
national trade.  This  is  the  principle  commonly  referred  to 
as  the  law  of  comparative  costs. 

As  stated  by  Bastable  in  his  "Theory  of  International 
Trade":  "John  Stuart  Mill's  conclusion,  in  his  first  and 
soundest  exposition  of  his  theory,  is  that  the  ratio  of  exchange 
in  the  case  of  commodities  which  are  subject  to  international 
trade  depends  on  the  comparative  intensity  of  the  demand  on 
each  side,  always  of  course  operating  within  the  limits  set  by 
comparative  costs.  .  .  .  This  Mill  calls  the  first  elementary 
principle  of  international  values." 

The  benefits  of  international  trade  come  from  the  advan- 
tage which  the  nation  derives  in  producing  commodities  in 
excess  of  its  own  needs  which  it  can  exchange  for  those  of 
other  nations  unable  or  unwilling  to  produce  like  commodities. 
It  may  be  to  the  advantage  of  a  nation  to  purchase  from 
another  nation  commodities  which  it  could  manufacture  itself, 
if,  as  may  well  happen,  it  can  purchase  imports  with  exports 
more  cheaply  than  it  can  manufacture  them. 

The  climate  and  resources  of  a  country  determine  whether 
or  not  it  is  advantageous  for  it  to  obtain  the  needed  products 
of  another  country  by  exchanging  its  own  products  for  those 
of  the  other  country  instead  of  producing  them  itself. 

The  apparent  handicaps  of  nature  and  industry  may,  how- 
ever, be  reduced  if  the  country  will  develop  to  the  utmost, 


INTERNATIONAL   DISTRIBUTION  59 

through  organized  and  intelligent  effort,  such  advantages  as 
it  may  possess.  This  course  calls  for  a  highly  developed 
economic  organization  worked  out  along  the  lines  of  produc- 
tion, transportation,  merchandising,  and  banking.  The  country 
attempting  such  industrial  expansion  must  produce  her  prod- 
ucts at  the  lowest  possible  cost  through  the  co-operation  of 
her  capital,  labor,  and  men  of  science;  she  must  have  every 
facility  for  transportation  on  both  land  and  sea;  she  must 
know  how  to  sell  her  goods  abroad ;  and  her  foreign  trade 
must  be  adequately  financed  by  an  organized  system  of 
international  banking. 

Such  a  nation  will  be  able  to  meet  the  competition  of 
foreign  trade  under  the  best  conditions.  So  ecjuipped,  the 
restrictions  imposed  by  comparative  costs  become  fewer  and 
fewer,  and  it  may  ultimately  come  to  pass  that  she  may  defy 
nature  itself. 

Dumping 

There  is  a  class  of  international  distribution  known  as 
"dumping,"  which  is  the  selling  of  surplus  goods  in  foreign 
markets  for  such  purposes  as  stabilization,  or  to  decrease  the 
home  supply  and  thus  maintain  high  domestic  prices. 

In  such  cases  the  goods  are  usually  offered  for  sale  abroad 
at  lowTr  prices  than  they  bring  at  home.  When  this  practice 
becomes  general  it  furnishes  additional  propaganda  against 
a  protective  tariff,  in  that  the  existence  of  such  a  tariff  enables 
the  foreigner  to  buy  under  more  favorable  conditions  than  can 
the  native  of  the  country.  Dumping  is  frec{uently  detrimental 
to  the  producers  of  the  importing  country.  On  the  other  hand 
it  sometimes  stimulates  them  to  improvements  and  adaptions 
that  more  than  offset  the  differences  in  price.  To  avoid  dump- 
ing certain  British  colonies  have  required  the  filing  of  non- 
dumping  certificates  on  the  part  of  the  exporter  as  a  part  of 
the  export  procedure. 


6o  GENERAL   CONSIDERATIONS 

Distribution  and  Credit 

One  ma}'  judge  the  credit  of  a  country  by  the  character  of 
its  imports,  for  they  are  the  surest  indication  of  its  financial 
stabiHty.  If,  during  the  borrowing  period,  the  country  imports 
luxuries  only,  it  may  indicate  an  unhealthy  condition.  But  if 
it  imports  things  necessary  for  the  upbuilding  of  its  industries 
and  the  development  of  its  resources,  its  credit  standing  is 
improved. 

Thus,  if  the  borrowing  country  imports  chiefly  iron,  steel, 
rails,  and  mining  machinery,  it  is  manifestly  developing  its 
resources;  whereas  if  it  imports  largely  champagne,  spices,  and 
silks,  this  might  show  that  instead  of  developing,  it  is  wasting 
its  resources  and  is  squandering  borrowed  money.  Since 
nations  are  composed  of  individuals,  it  is  justifiable  to  judge 
the  character  and  conduct  of  a  nation  by  the  tendencies  of  a 
majority  of  its  people. 

Distribution  and  Prices 

Foreign  trade  is  a  most  potent  force  in  regulating  over- 
production. Hence  it  is  likewise  a  great  aid  in  keeping  prices 
level.  The  overseas  markets,  by  absorbing  the  surplus,  keep 
distribution  active  and  prevent  a  storage  of  goods  in  the  ware- 
houses at  home  that  sooner  or  later  must  depress  prices. 

It  is  the  natural  function  not  only  of  the  international 
trader  but  of  every  intermediary  between  the  producer  and  the 
consumer  so  to  gauge  the  extent  of  demand  and  supply  that 
the  equilibrium  between  production  and  consumption  is  pre- 
served. So  long  as  the  channels  of  distribution  are  kept  open 
and  the  markets,  domestic  and  foreign,  absorb  production,  so 
long  will  prices  remain  firm  to  the  benefit  of  all  concerned. 

Maximum  and  Minimum  Efforts  in  Distribution 

Results  are  usually  proportionate  to  the  efforts  made  to 
obtain  them,  and  of  two  efforts  in  the  same  direction  the  one 


INTERNATIONAL    DISTRIBUTION  6l 

which  is  the  more  intense  will  usually  produce  the  greater 
results. 

For  example  in  the  case  of  the  automatic  method  of  dis- 
tribution so  popular  in  the  United  States  in  connection  with 
foreign  trade,  the  risk  will  be  small,  but  the  returns  from  such 
a  course  will  naturally  be  small.  This  method  consists  in  send- 
ing abroad  some  catalogues,  in  placing  advertisements  in  a 
few  export  publications,  and  awaiting  results. 

On  the  other  hand,  if  the  manufacturer  utilizes  a  larger 
number  of  methods  of  distribution — if  in  addition  to  local 
advertising  and  the  issue  of  catalogues  he  will  also  send  out 
salesmen,  advertise  in  foreign  newspapers,  and  use  the  other 
recognized  means  of  promotion — he  will  obtain  quicker,  better, 
and  more  certain  results.  It  will,  however,  require  a  far  larger 
expenditure  and  involve  a  greater  risk. 

Maximum  efforts  produce  maximum  results,  always  pro- 
vided of  course  that  the  efforts  carry  with  them  the  greatest 
efficiency  both  in  conception  and  in  execution,  in  direction  as 
well  as  in  dynamic  energy.  Ordinarily  if  there  is  no  risk, 
there  is  little  or  no  profit.  Interest  on  investment  is  usually 
highest  when  the  risk  is  the  greatest,  while  the  perfectly  safe 
investment  usually  commands  a  low  rate  of  interest. 

It  is  one  of  the  maxims  of  poHtical  economy  that  a  product 
when  sent  into  a  market  must  encounter  the  chances  of  the 
market,  and  the  capital  invested  in  the  distribution  of  the 
product  must  likewise  encounter  the  hazards  incident  to  every 
commercial  effort.  In  international  commerce  the  hazards 
relating  to  distribution  are  greater  than  those  in  home  trade, 
but  the  rewards  are  commensurate. 

Mistaken  Methods  of  Distribution 

Much  provincialism  is  still  apparent  among  the  manufac- 
turers in  America  who  attempt  to  enter  foreign  markets. 
Some  of  them  imagine  that  once  a  concern  has  established 


62  GENERAL   CONSIDERATIONS 

itself  firmly  in  the  United  States,  forei^  trade  will  come  as  a 
matter  of  course  with  little  or  no  effort  towards  securing  it. 
There  are  producers  who  go  to  the  other  extreme  and  assume 
that  to  secure  one's  share  of  international  trade,  they  must 
overcome  difficulties  more  imaginary  than  real.  There  are 
also  those  who  think  of  foreign  trade  as  a  costly  plaything, 
which  only  the  richest  can  afford. 

Such  notions  result  from  failure  to  understand  the  prin- 
ciples of  distribution.  Sooner  or  later  there  comes  a  time  in 
the  life  of  every  progressive  nation  when  its  commercial  activi- 
ties become  focused  on  foreign  trade.  Only  now  has  America 
reached  that  stage  in  its  development.  For  us  as  for  every 
nation  foreign  trade  is  beset  with  difficulties,  but  they  are 
relatively  no  greater  than  those  of  any  other  commercial  enter- 
prise when  the  opportunities  for  profit  are  considered. 

Perhaps  the  most  futile  course  is  that  of  the  man  who  sits 
behind  his  desk  and  waits  for  trade  to  come  to  him  from  across 
the  seas  without  any  appreciable  effort  on  his  part.  While 
much  of  our  early  export  trade  came  to  us  in  this  way,  that 
day  of  easy  profits  is  over  for  the  time.  At  the  present  moment 
the  foreign  buyer  does  not  need  to  solicit  his  source  of  supply. 
The  pendulum  may  swing  back  to  its  former  place  but  today  it 
is  the  producer  who  must  needs  employ  aggressive  methods  to 
satisfactorily  market  his  goods. 

Acquaintance  an  Element  in  Distribution 

Acquaintance  will  always  be  a  most  important  factor  in 
determining  the  extent  of  distribution  in  foreign  trade.  Un- 
fortunately the  United  States  is  still  misunderstood  in  many 
countries.  We  have  been  the  subject  of  much  propaganda  of 
which  many  of  our  own  citizens,  travelers  abroad,  and  writers 
at  home  have  been  the  unconscious  agents. 

The  attempts  of  foreign  competitors  in  overseas  markets 
to  misrepresent  us,  our  political  policies,  and  our  goods  have 


INTERNATIONAL   DISTRIBUTION  63 

been  ably  seconded  by  irresponsible  newspaper  and  magazine 
correspondents;  and  also  the  careless  talk  of  our  own  citizens 
has  been  quoted  and  misapplied  for  the  benefit  of  our  com- 
petitors' interests. 

The  establishment  of  American  banks  abroad,  especially  in 
the  newer  markets,  should  go  far  to  offset  the  handicap.  The 
increasing  tendency  of  the  exporters  to  establish  branch  offices 
in  foreign  lands  will  be  of  great  assistance  in  this  direction. 
Only  when  American  traders  begin  to  settle  in  trade  centers 
will  the  influence  of  their  high  regard  for  commercial  honesty 
and  business  efficiency  begin  to  be  fully  recognized. 

Doubtless  the  attitude  of  America  in  the  great  war  and  in 
the  peace  deliberations  will  do  much  toward  clearing  the  air 
and  defining  our  aims  and  aspirations  so  clearly  that  every 
man  can  read  them.  Practical  idealism  has  its  place  in  business 
as  well  as  in  politics  and  everything  indicates  that  the  Ameri- 
can trader  will  be  accepted  at  a  higher  value  in  the  future  than 
in  the  past.    May  he  prove  worthy  of  the  increased  confidence! 


CHAPTER    IX 

THE  BEST  MARKETS  FOR  THE  AMERICAN 

EXPORTER 

Trade  Centers 

The  exporter  will  frequently  find  himself  confronted  with 
a  choice  of  several  markets,  each  of  which  appears  to  offer 
ecjual  advantages  and  possibilities  but  only  one  of  which  can 
be  selected.  The  nature  of  his  product  will  usually  determine 
the  field  of  his  initial  activities.  Other  things  being  equal, 
however,  it  will  be  well  for  him  first  to  establish  his  connec- 
tions with  the  world  trade  centers  before  he  launches  his  cam- 
paign in  any  one  country  or  locality. 

London 

London  is  pre-eminently  the  place  where  a  world  trader 
should  locate  first  of  all,  if  only  for  the  purpose  of  using  it 
as  a  laboratory  in  which  to  study  international  trade.  Trade 
connections  should  be  sought  there  before  any  other  steps  for 
obtaining  foreign  business  are  undertaken. 

The  reason  for  this  is  that  London  has  been  and  may  soon 
again  become  the  center  of  all  international  trade.  From  that 
center  emanates  a  vast  network  of  commercial  activities  which 
reaches  every  important  trading  port  in  the  wide  world.  In 
London  you  may  meet  a  merchant  from  Siberia  and  a  banker 
from  Australasia.  You  may'  sell  goods  there  to  the  man  in 
Calcutta  or  buy  from  a  house  located  in  Madagascar.  That 
is  w^hy  no  exporter  thinks  himself  of  much  distinction  as  an 
international  trader  until  he  can  put  on  his  stationery  the  sig- 
nificant words  "London  Office." 


THE    BEST    FOREIGN    MARKETS  65 

Paris 

Of  course,  Paris  is  also  a  great  world  trading  center,  but 
it  has  more  charm  for  the  buyer  than  for  the  seller.  Never- 
theless, Paris  ought  always  to  be  considered  in  connection  with 
the  idea  of  establishing  headquarters  or  a  branch  house  on 
the  Continent. 

It  is  easy  enough  to  decide  upon  the  advantages  of  trade 
with  most  of  the  old  European  countries,  and  upon  the  nature 
and  extent  of  one's  connections  in  the  effort  to  secure  a  share 
of  European  trade.  This  can  be  done  in  many  cases  even 
before  a  personal  investigation  on  the  ground  is  undertaken, 
because  information  concerning  the  opportunities  and  possi- 
bilities of  the  "old"  markets  of  Europe  as  they  were  before 
the  war,  is  pretty  well  known.  This  knowledge  has  been  well 
systematized  and  is  easily  obtainable  from  sources  which  are 
generally  reliable. 

"New"  Markets 

The  difficulty  of  choice  becomes  serious  only  when  one 
contemplates  entering  directly  upon  trade  with  what  may  be 
called  the  "new"  markets.  By  this  phrase  is  meant  either  a 
market  which  has  not  yet  begun  to  be  exploited  to  its  capacity, 
or  one  of  those  markets  which  are  becoming  important  owing 
to  their  increased  commercial  activity.  Of  course,  in  years 
of  actual  age  many  of  the  so-called  new  markets  are  much 
older  than  even  the  ancient  trade  centers  of  London  and  Paris. 
The  new  markets  which  are  particularly  interesting  the  world 
today  are  in  China,  Russia,  Latin  America,  and  the  newly 
formed  European  states. 

China 

China  with  its  enormous  population  is  as  yet  in  a  very 
unsettled  condition.  Moreover,  the  commercial  demands  of 
the  population  are  few  and  limited.     The  giant  is  still  asleep 


C^  GENERAL   CONSIDERATIONS 

and  the  awakening  has  thus  far  taken  place  only  in  politics.  It 
will  be  half  a  century  before  China  will  develop  the  capacity 
to  absorb  Western  civilization. 

Eventually  China  will  offer  an  opportunity  unequaled  per- 
haps elsewhere.  For  the  present,  China  should  receive  the 
most  careful  attention  of  American  diplomats,  statesmen,  and 
financiers,  so  that  when  the  great  opportunity  at  last  arrives 
the  Americans  will  be  among  the  fortunate  people  who  will 
sell  to  modern  China — with  its  four  hundred  million  inhabi- 
tants— the  commodities  that  it  must  have. 

As  soon  as  political  readjustment  is  complete,  the  next 
phase  of  China's  progress  will  open.  It  will  be  along  purely 
economic  lines.  China's  finances  must  be  rehabilitated  and 
Its  monetary  standard  must  be  reformed.  It  is  along  these 
lines  that  the  American  government  and  people  should  en- 
deavor to  assist  the  Chinese  government. 

Russia 

Russia  in  many  respects  resembles  China.  Conditions  are 
in  every  way  unsettled.  Here,  too,  the  bulk  of  the  population 
is  still  asleep,  so  far  as  commercial  considerations  are  con- 
cerned. As  in  China  a  great  deal  of  commerce  is  conducted 
on  the  lines  of  pure  barter,  that  is,  the  exchange  of  commodi- 
ties without  the  use  of  money.  The  Russian  peasants  are  not 
unlike  the  population  of  China,  in  that  they  subsist  on  a  very 
simple  diet,  they  produce  nearly  everything  that  they  need,  and 
are  satisfied  with  bare  necessities.  The  luxuries  of  civiliza- 
tion are  almost  unknown  among  the  masses  of  the  rural 
population. 

At  present,  trade  with  Russia  is  seriously  hampered  by 
political  disturbances.  A  trade  tax  was  put  in  operation  long 
ago  compelling  all  foreign  concerns  to  pay  a  proportion  of 
their  earnings  to  the  government.  But  new  laws  and  regula- 
tions are  coming  into  effect  every  day.     No  one  knows  now 


THE   BEST   FOREIGN   MARKETS  67 

what  will  become  of  Russia.  Taking  it  all  in  all,  despite 
Russia's  great  need  for  foreign  enterprise  and  foreign  capital, 
the  outlook  is  most  uncertain  and  will  continue  to  be  so  until 
some  stabilization  is  effected. 

Latin  America 

With  the  exception,  perhaps,  of  the  British  colonies,  the 
best  new  markets  for  the  American  exporter  at  the  present 
time  will  be  found  in  Latin  America,  if  we  exclude  the  Euro- 
pean market  in  its  present  depleted  state. 

In  the  first  place,  there  is  a  similarity  of  government  in 
Latin  America  and  a  practical  alliance  of  all  the  Latin-Ameri- 
can republics  in  their  political  and  commercial  aims.  There 
are  well-established  ties  which  bind  the  United  States  to  all 
the  sister  republics  below  the  Rio  Grande. 

The  total  population  of  these  countries,  it  is  true,  is  much 
smaller  than  that  of  either  China  or  Russia,  but  it  is  fast 
increasing. 

Unlike  Chinese  or  Russian,  Spanish  and  Portuguese — 
the  only  two  languages  that  are  spoken  by  the  bulk  of  the 
population — can  easily  be  learned.  The  inhabitants  of  Cen- 
tral and  South  America  for  the  most  part  are  thoroughly  mod- 
ern in  their  demands.  Nearly  everything  that  they  produce 
we  can  use,  and  our  finished  products  of  all  sorts  find  a  ready 
market  among  the  Americans  of  the  Southern  Hemisphere. 

Special  Lines  of  Effort 

One  way  in  which  we  can  assist  our  fellow  Americans  in 
the  south  is  by  sending  our  capitalists  to  help  develop  their 
resources — to  build  railroads,  telephone  lines,  electric  and  gas 
works,  and  to  open  up  their  mines  and  forests.  We  should 
send  our  young  men  there  to  study  the  language  and  customs 
of  the  people  and  to  learn  how  to  fraternize  with  them.  These 
young  men  may  be  expected  later  to  become  directors  of  enter- 


68  GENERAL   CONSIDERATIONS 

prises  on  the  Southern  Continent,  and  thereby  serve  as  the 
most  important  hnk  binding  forever  in  friendship  the  great 
northern  repubhc  with  her  sister  nations  to  the  south.  All 
this  is  to  some  extent  now  being  done,  but  only  on  a  small 
scale. 

In  the  meantime,  the  manufacturers  and  traders  of  the 
United  States  should  devise  more  effective  ways  for  promot- 
ing their  interests  in  Latin  America.  They  should  form  syn- 
dicates for  the  joint  development  of  the  markets  and  resources 
of  the  twenty  republics.  Individual  concerns,  whenever  pos- 
sible, should  send  personal  representatives  to  study  conditions 
and  opportunities  in  order  to  handle  the  trade  intelligently. 
Above  all,  various  trade  associations  should  be  urged  to  co- 
operate in  the  work  of  assisting  individuals  and  firms  to 
establish  themselves  in  the  trade  of  South  America. 

General  Conclusions 

Inasmuch  as  the  scattering  of  forces  is  rarely  wise,  a  search 
for  markets  too  far  overseas  is  not  on  the  whole  to  be  advo- 
cated. Here  and  there  a  concern  will  find  it  advisable  to  seek 
trade  in  South  Africa,  in  Australia,  in  India,  and  other  far- 
distant  lands,  but  for  a  beginning  in  foreign  trade,  it  is  much 
better  to  concentrate  on  one  or  two  near-by  markets. 

In  establishing  headquarters  abroad,  due  attention  should 
be  paid  to  the  future  development  of  trade  as  well  as  to  its 
immediate  prospects. 

If  participation  in  the  trade  of  Russia  is  contemplated 
not  only  through  local  agents  but  by  the  personal  efforts  of  the 
concern's  own  salesmen  and  agents  In  Germany,  Denmark, 
etc.,  headquarters  in  Paris  might  be  more  suitable  than  in  any 
other  trade  center  of  Europe. 

In  South  America  one  may  hesitate  between  Buenos  Aires 
and  Rio  de  Janeiro,  but  a  wise  trader  will  choose  one  of  these 
cities  in  preference  to  any  others  in  South  America. 


THE   BEST   FOREIGN   MARKETS  69 

A  firm  desirous  of  the  world's  trade  should  first  of  all 
investigate  the  possibilities  of  the  old  markets  for  its  line  of 
products.  For  that  purpose  a  member  of  the  firm  should  go 
to  London  and  to  the  Continent  and  personally  survey  the  field 
there.  If  it  is  found  to  be  favorable,  the  headquarters  office 
then  should  be  established  either  in  London  or  in  Paris,  not 
only  as  a  matter  of  direct  business,  but  also  to  keep  in  touch 
w^ith  the  markets  and  competition.  The  next  step  should  be 
to  go  to  South  America  to  study  the  prospects,  and  if  the  out- 
look still  appears  favorable,  to  establish  headquarters  in  Buenos 
Aires  or  in  Rio  de  Janeiro.  When  a  concern  gets  as  far  as 
that,  it  will  be  well  under  way  upon  the  sea  of  world  commerce. 


CHAPTER   X 

THE  COMMERCIAL  POLICIES  OF  WORLD  POWERS 

The  Development  of  Economic  Thought 

The  commercial  policies  of  the  great  nations  are  the  results 
of  an  economic  development  that  has  been  going  on  for  cen- 
turies. They  have  been  influenced  not  only  by  the  history  and 
traditions,  the  temperament,  and  industry  of  their  peoples,  but 
they  reflect  the  ever-changing  economic  ideas  of  the  times.  If 
we  arc  to  understand  them  we  must  know  something  of  the 
history  of  the  development  of  economic  thought. 

The  Ancient  World 

In  the  ancient  world  the  traders  were  organized  locally  and 
their  policies  were  strictly  municipal.  The  merchants  of  Tyre, 
Carthage,  and  Rhodes  thought  only  of  the  welfare  of  their 
respective  cities.  The  commercial  policies  of  the  Middle  Ages 
still  failed  to  exhibit  any  national  tendencies  and  concerned 
themselves  chiefly  with  the  exclusion  of  all  foreigners  from 
participation  in  local  commerce.  It  was  not  until  the  sixteenth 
century  that  men  began  to  think  and  to  legislate  along  national 
lines.  They  were  influenced  at  first  by  the  economic  doctrine 
known  as  mercantilism. 

Mercantilism 

Mercantilism  was  the  first  serious  attempt  to  explain  the 
circulation  of  wealth.  In  their  effort  the  mercantilists  were 
not  entirely  successful.  They  confused  capital  with  money 
and  wove  into  their  economic  theories  many  another  fallacy. 
They  exaggerated  the  function  of  money  and  failed  to  grasp 

70 


COMMERCE   POLICIES    OF   WORLD    POWERS  71 

the  rudimentary  fact  that  without  selHng  there  can  be  no 
buying. 

They  believed  that  the  balance  of  debits  and  credits  is  con- 
vertible, and  never  stopped  to  consider  that  a  nation  may  go 
on  for  a  long  time  importing  goods  of  greater  value  than 
those  it  exports  without  exhausting  its  store  of  precious  metals. 
They  ignored  the  important  truth  that  many  payments  are 
made  not  in  money  but  in  merchandise,  and  that  an  excess  in 
the  value  of  imports  over  exports  is  often  covered  by  drafts  on 
foreign  ports  for  amounts  due  to  the  importing  country.  They 
failed  to  perceive  that  nations  as  well  as  individuals  grow 
rich  by  producing  more  than  they  consume.  Their  fallacious 
doctrine  that  exports  must  exceed  imports  in  order  that  the 
country  may  be  benefited  through  foreign  trade  finds  support- 
ers even  in  this  day. 

They  identified  the  interests  of  the  people  at  large  with 
those  of  but  one  class — the  traders.  Their  theory  caused  un- 
speakable rivalries  in  the  seventeenth  century  between  France, 
England,  and  Holland,  each  attacking  the  other  with  tariff 
assaults  and  reprisals.  Mercantilists  of  the  sixteenth  century 
failed  to  perceive  that  in  refusing  the  admission  of  foreign 
goods  as  a  retaliatory  measure,  they  frequently  deprived  them- 
selves of  products,  the  loss  of  which  more  than  offset  the 
supposed  economic  advantages. 

Eighteenth  Century  Laissez-Faire 

In  the  eighteenth  century  a  reaction  arose  against  mercan- 
tilism which  resulted  in  the  establishment  of  the  physiocratic 
system  founded  by  Ouesnay,  advocated  by  Turgot,  and  Influ- 
enced by  the  writings  of  John  Locke  and  Rousseau.  These 
writers  believed  in  the  superiority  of  agriculture  over  com-' 
merce,  considering  it  the  sole  source  of  wealth.  Their  theories 
were  quite  the  opposite  of  those  of  the  mercantile  school.  They 
believed  not  in  protection  but  in  free  trade,  and  the  policy  of 


72 


GENERAL    CONSIDERATIONS 


laissez-faire  was  their  pet  doctrine.  The  theories  of  the  physi- 
ocrats were  finally  crystalized  in  the  works  of  Adam  Smith  and 
David  Hume,  who  laid  the  foundations  of  the  science  of 
political  economy. 

Nineteenth  Century  Protectionism 

In  the  early  part  of  the  nineteenth  century  another  reaction 
set  in  and  the  tendency  throughout  the  world  began  again  to 
turn  in  favor  of  tariff.  This  movement,  commencing  in  1834 
with  the  formation  of  the  German  Zollverein,  materialized 
into  the  modern  economic  theory  of  protection,  which  is 
largely  a  policy  of  encouraging  home  industries  by  the  imposi- 
tion of  customs  duties  on  imports  or  by  bounties  given  to 
domestic  producers.  Thus  the  moderu  nations  have  to  an 
extent  returned  to  the  old  doctrine  of  mercantilism.  In  recent 
years  protection  has  become  universal  and  no  nation  is  now 
without  some  form  of  it. 

Special  Policies  of  World  Powers 

The  special  commercial  policies  of  the  nations  today  are 
of  three  kinds: 

1.  Those  relating  to  the  development  of  a  country  within 

its  own  borders,  as  exemplified  chiefly  in  its  protec- 
tive tariff  systems. 

2.  Those  relating  to  a  nation's  maritime  policies  found 

in  its  navigation  laws. 

3.  Those  relating  to  a  country's  trade  expansion  in  for- 

eign markets,  as  shown  in  its  devices  for  the  promo- 
tion of  foreign  trade. 

These  special  policies,  as  well  as  the  general  foreign  com- 
mercial policy  of  each  nation,  as  discussed  at  the  end  of  this 
chapter,  are  promoted  by  a  variety  of  methods  most  of  which 
come  under  one  of  the  following  heads: 


COMMERCE  POLICIES   OF   WORLD   POWERS  73 

1.  Diplomatic  efforts 

2.  The  display  of  armed  force 

3.  Private  efforts 

4.  Legislative  aids 

5.  Pecuniary  aids  (subsidies,  etc.) 

Protective  Tariff  Systems 

The  protection  of  home  industries  against  foreign  compe- 
tition is  now  practically  universal.  France,  Germany,  Austria, 
Italy,  and  the  United  States  are  the  strongholds  of  the  high 
tariff  system.  Holland,  Belgium,  Switzerland,  Sweden,  and 
Norway  favor  moderate  tariffs.  England,  still  influenced  by 
the  thought  of  Smith  and  Hume,  has  a  very  low  tariff,  thus  en- 
couraging the  importation  of  food,  raw  materials,  and  semi- 
manufactured goods,  and  making  the  country  the  great  center 
for  the  reshipping  of  foreign  products. 

A  further  protective  policy  which  is  used  to  foster  domes- 
tic commerce  is  that  of  levying  export  duties  ad  valorem  on 
certain  classes  of  goods.  This  policy  has  been  followed  par- 
ticularly in  Turkey,  Persia,  and  Servia.  Some  countries  levy 
special  export  duties  for  special  purposes.  Sweden  and  Nor- 
way, for  example,  levy  export  duties  on  wood  and  timber  in 
order  to  preserve  their  forests. 

In  certain  cases  particular  articles  may  be  prohibited  from 
entering  a  country  at  all,  either  as  a  matter  of  public  policy 
based  on  moral  or  religious  reasons,  as  opium  has  been  pro- 
hibited in  China,  or  for  reason  of  public  security,  as  in  the 
case  of  ammunition  entering  the  countries  of  Central  America. 
These  are  not,  of  course,  matters  of  commercial  protection. 

In  the  United  States  a  constitutional  provision  prohibits 
any  tax  on  exports.  In  foreign  countries,  export  duties  are 
sometimes  levied  to  meet  extraordinary  expenditures,  as  when 
during  the  Boer  War,  England  placed  an  extra  duty  on  coal, 
coke,  and  manufactured  fuel.     Some  countries  collect  extra 


74  GENERAL   CONSIDERATIONS 

duty  from  certain  commodities  on  which  they  have  a  monop- 
oly, as  for  instance,  nitrate  of  soda  exported  from  Chile  and 
cork  from  Spain.  There  are  duties  on  coffee,  rubber,  sugar, 
rum,  molasses,  tobacco,  nuts,  wood,  hides,  skins,  wool,  sponges, 
olives,  spices,  tea.  rice,  silk,  and  precious  stones  exported  from 
different  parts  of  Asia,  Africa,  and  of  Central  and  South 
America.  Protective  export  duties  are  not  numerous  and  are 
levied  only  in  cases  of  emergency. 

There  are  also  the  so-called  "transit  duties"  which  are 
levied  upon  merchandise  passing  through  one  country  and 
destined  for  another.  Such  was  the  case  in  Russia  where 
transit  duties  on  goods  destined  for  Persia  were  imposed  in 
order  that  Russia  might  be  favored  in  Persian  markets.  The 
importation  of  sugar  into  Great  Britain  from  sugar-bounty- 
paying  countries,  was  recently  prohibited,  the  purpose  being  to 
protect  the  domestic  sugar  producers  in  certain  British  colonies 
and  the  sugar  refiners  in  Great  Britain  proper. 

Against  the  bounties  of  one  nation,  countervailing  duties 
are  sometimes  enacted  by  another.  Thus,  against  the  bounties 
of  European  countries  on  sugar,  there  existed  in  the  United 
States  a  countervailing  duty  to  protect  domestic  sugar  pro- 
ducers. As  a  part  of  the  same  policy  of  protection,  a  nation 
sometimes  enacts  retaliatory  duties  upon  goods  imported  from 
another  country  which  has  discriminated  against  its  citizens. 
This  was  the  case  between  Austria-Hungary  and  Roumania  in 
1892-1894,  and  caused  the  tariff  war  of  1893-1894  between 
Germany  and  Russia. 

Navigation  Laws 

The  commercial  policies  which  pertain  to  the  maritime 
expansion  of  a  country  are  to  be  found  in  the  navigation 
policies  of  the  world  powers  and  in  their  laws — as  in  England's 
navigation  acts  of  165 1  and  1663  and  the  registry  law  of  the 
United  States  enacted  in  the  year  1789. 


COMMERCE   POLICIES   OF   WORLD   POWERS  75 

Certain  countries  have  aimed  to  exercise  jurisdiction  over 
at  least  some  parts  of  the  seas.  Thus  Venice  at  one  time 
controlled  the  Adriatic,  England  the  waters  surrounding  its 
home  islands,  and  the  Scandinavian  countries  the  Baltic  Sea. 

This  mare  claiisiim  policy  will  never  be  popular,  except 
with  the  few  nations  which  maintain  it  for  special  reasons. 
Such  nations  are  never  at  a  loss  to  present  excellent  arguments 
in  its  defense.  The  doctrine  of  the  freedom  of  the  seas  with 
equal  rights  to  unrestricted  passage  for  all  nations  may  be 
expected  to  form  a  part  of  the  general  policy  of  all  excluded 
nations  until  the  ideal  is  attained. 

Maritime  policy  has  been  promoted  by  protective  legisla- 
tion in  favor  of  the  shipping  industry  and  against  foreign 
competition  by  levying  tonnage  fees  and  custom  duties  on  for- 
eign ships  participating  in  domestic  trade,  by  the  restriction  of 
the  coasting  trade  to  native  ships,  and  by  similar  means.  The 
advancement  of  maritime  interests  has  been  accomplished  by 
the  policy  of  ship  subsidies.  Government  aid  to  the  shipping 
industry  before  the  war  was  liberally  provided  by  the  British, 
German,  and  French  governments,  the  latter  government 
being  the  most  generous  of  the  three. 

Devices  for  Promoting  Foreign  Trade 

Trade  expansion  in  foreign  markets  is  usually  promoted 
by  spontaneous  private  action,  with  greater  or  less  assistance 
from  the  government  through  its  laws,  subsidies  to  shipping, 
its  diplomatic  channels  and  consular  staffs,  the  negotiation  of 
favorable  treaties,  etc.  The  spontaneous  action  of  private 
interests  which  seek  on  their  own  initiative  an  outlet  for  their 
surplus  products  or  for  their  commercial  activities  in  other 
ways,  is  the  most  potent  factor  in  trade  expansion  and  in  the 
conquest  of  foreign  markets. 

In  spontaneous  trade  expansion  abroad  and  the  promotion 
of  the  overseas  commerce,  private  organizations  are  of  great 


76  GENERAL   CONSIDERATIONS 

assistance.     The  American  auxiliaries  to  the  promotion  of 
foreign  trade  will  be  discussed  in  a  subsequent  chapter. 

In  this  connection  it  is  interesting  to  note  the  influence 
which  the  German  Kartcls  have  exercised  upon  foreign  trade 
in  general  and  the  American  export  trade  in  particular.  By 
means  of  these  combinations  of  exporters  the  Germans  were 
able  to  regulate  trade  and  to  offer  a  solid,  organized,  combined, 
and  aggressive  front  to  the  advancement  and  protection  of 
their  interests  abroad.  By  reason  of  the  fact  that  in  America 
such  combinations  of  exporters  were  prohibited  until  the  pas- 
sage of  the  Webb-Pomerene  Act,  there  have  been  few  great 
organizations  for  the  purpose  of  offering  combined  and  effec- 
tive resistance  to  competition  in  foreign  markets.  Thus  the 
Germans  had  an  additional  advantage  over  this  country  by 
means  of  a  device  which  had  not  only  the  sanction  of  their 
government  but  its  active  support  and  from  the  use  of  which 
the  United  States  was  deprived  by  its  own  laws. 

General  Policies  of  World  Powers 

Besides  its  special  commercial  policies,  each  great  nation 
will  be  found  to  have  a  general  policy,  a  policy  which  is  not 
merely  commercial  and  economic  but  political  as  well,  its  roots 
lying  deep  in  the  national  consciousness.  For  the  maintenance 
of  this  policy  the  people  are  willing  often  to  go  to  great  lengths. 

United  States 

Hitherto  the  United  States  has  been  the  exception  that 
proves  the  rule  in  this  particular.  The  nearest  approach  that 
it  has  made  to  such  a  policy  is  to  be  found  in  the  Monroe 
Doctrine,  and  in  an  attitude  of  isolation  and  aloofness  in  inter- 
national affairs — a  policy  often  harmful  to  commerce  with 
the  rest  of  the  world.  What  the  future  general  policy  of  this 
great  country  will  be  is  still  uncertain  but  it  is  to  be  hoped 
that  out  of  the  great  turmoil  of  international  conflict  and 


COMMERCE   POLICIES   OF   WORLD   POWERS  77 

negotiation  we  shall  emerge  with  a  definite  and  wise  commer- 
cial policy  that  will  largely  determine  the  course  of  our  future 
history. 

Great  Britain 

The  general  commercial  policy  of  Great  Britain  has  been 
for  many  years  to  maintain,  first  its  commercial  supremacy  on 
the  sea,  and  second  the  integrity  of  its  colonial  empire  in  all 
parts  of  the  world.  The  great  war  has  demonstrated  as  nothing 
else  could,  how  supremely  successful  she  has  been  in  both 
endeavors. 

Germany 

The  policy  of  Germany,  while  of  comparatively  recent 
origin,  was  pushed  with  remarkable  energy  and  ability.  It 
aimed  at  the  conquest  of  the  world's  markets  and  the  creating 
of  a  strong  merchant  marine.  It  was  developed  along  lines 
similar  to  the  country's  military  machine  and  with  a  similar 
un.scrupulousness  and  ruthlessness,  ultimately  degenerating 
into  a  policy  of  military  conquest,  disastrous  failure,  and  a 
future  of  the  greatest  uncertainty. 

France 

France  before  the  war  seemed  satisfied  with  the  cordial  and 
preferred  commercial  relations  which  it  had  gained  solely 
through  its  diplomacy.  The  nation  had  strong  colonial  ambi- 
tions and  was  seeking  to  develop  its  merchant  marine  through 
subsidies.  It  is  impossible  at  this  time  to  forecast  her  future 
aims. 

Other  Nations 

It  is  possible  to  discuss  the  general  policies  of  the  other 
leading  nations  only  in  terms  of  the  past.  With  the  war  all 
things  came  to  a  stop,  and  it  is  too  much  to  say  that  their 


78  GENERAL   CONSIDERATIONS 

general  policies  may  be  expected  to  resume  their  former  direc- 
tions after  the  world  reverts  to  normal  conditions.  In  some 
instances  it  is  obviously  impossible,  in  other  cases  a  new 
direction  is  already  evident. 

Russia's  chief  aims  were  in  the  Far  East,  and  in  the  indus- 
trial and  commercial  development  of  the  country  through 
foreign  capital  and  brains. 

Austria-Hungary  has  been  in  the  past  bent  on  extending 
its  influence  over  the  Adriatic,  and  its  commercial  aims  have 
been  concerned  largely  with  the  Balkan  situation  and  its  trade 
aspects. 

The  Sdandinavian  countries  had  a  joint  policy  of  maintain- 
ing their  commercial  integrity  abroad  and  of  intensively  cul- 
tivating trade  intercourse  among  themselves  and  with  near-by 
states. 

Italy  had  great  colonial  ambitions  in  Africa  but  its  foreign 
trade  policy  seems  to  have  been  chiefly  in  the  direction  of 
obtaining  toleration  for  its  emigrants  and  exercising  close 
supervision  over  its  subjects  in  all  countries,  to  the  end  that 
if  its  citizens  should  not  return  to  their  native  land  after  they 
had  made  their  small  fortunes  abroad,  at  least  that  they  should 
not  fail  to  contribute  their  quota  to  the  welfare  of  their 
relatives  at  home. 

Japan's  immediate  policy  was  concerned  with  the  Far  East 
and  to  obtain  equal  rights  for  its  citizens  everywhere.  Its 
principal  aim.  is  practically  to  monopolize  the  trade  of  Eastern 
Asia. 

Holland's  foreign  policy  was  to  keep  what  it  had  and  to 
look  for  more  in  the  way  of  distribution.  Holland  always 
has  been  the  abode  of  a  large  number  of  those  intermediaries, 
who  are  such  potent  factors  in  the  international  marketing  of 
commodities. 

Spain  was  content  to  rest  upon  its  glory  of  the  past  and, 
like  the  United  States,  did  not  seem  to  have  any  strong  or 


COMMERCE   POLICIES   OF  WORLD   POWERS  79 

well-defined  foreign  trade  policy,  except  with  regard  to  Africa 
and  in  the  maintenance  of  particularly  cordial  commercial 
relations  with  all  the  Spanish-speaking  countries  of  the  world. 

The  smaller  nations  and  the  oriental  countries  have  had 
all  they  could  do  in  keeping  their  heads  above  water  and  in 
safeguarding  their  political  independence.  They  could  not, 
even  if  they  would,  pursue  a  consistent  foreign  trade  policy. 

The  South  American  countries  have  an  international  trade 
policy  which  is  much  the  same  for  all.  They  endeavor  to 
utilize  their  diplomatic  and  consular  staffs  and  to  use  other 
means  in  attracting  capital,  trade,  and  immigration  into  their 
countries — particularly  capital. 

Knowledge  of  Special  Trade  Policies 

The  knowledge  of  the  special  policies  of  the  country  where 
the  prospective  market  is  located  is  essential  to  commercial 
success  abroad.  A  good  idea  of  the  general  foreign  trade 
policy  of  the  country  with  which  one  expects  to  deal  is  often- 
times valuable  and  never  useless. 


CHAPTER   XI 

LOOKING  INTO  THE  FUTURE  OF  FOREIGN  TRADE 

What  of  the  Future? 

Every  sound  business  is  started  and  conducted  with  an 
eye  to  the  future.  Today  every  wide-awake  business  man, 
every  active  or  prospective  foreign  trader  is  asking  himself 
and  others:  "What  of  the  future?"  We  can  best  judge  it  by 
the  past.  In  surveying  its  vistas  by  the  lamp  of  experience 
and  in  the  light  of  the  startling  events  which  have  taken  place 
in  the  recent  history  of  the  nations,  certain  prognostications 
may  be  ventured. 

In  formulating  these  one  has  to  be  guided  by  the  unusual 
developments  of  the  past  few  years  in  the  domains  of  inter- 
national politics,  economics,  and  sociology.  Every  business 
is  fundamentally  dependent  upon  politics,  which  includes  law, 
government,  order,  and  the  current  ideas  of  freedom.  It  is 
also  dependent  upon  economics,  the  financial  and  industrial 
status  of  the  people,  and  upon  social  forces,  which  produce 
and  which  are  represented  by  human  wants  and  desires  and, 
in  the  widest  sense  of  the  word,  by  social  aspirations. 

The  Individualistic  Nations 

The  world  has  been  astounded  by  the  recent  socialistic  up- 
heaval in  Russia.  This  phenomenon  is  too  vast  and  momen- 
tous for  discussion  here.  Its  occurrence,  and  the  fascina- 
tion of  this  sort  of  sudden  social  transformation  for  a  certain 
type  of  mind,  will  have  the  effect  of  arousing  the  rest  of  the 
world  to  strenuous  preventive  measures.  There  is  the  best 
of  reasons  to  believe  that  the  most  potent   factors  of  the 

80 


THE  FUTURE  OF  FOREIGN  TRADE        8l 

peculiar  and   radical   social   revolution   in   Russia   were   the 
oppression,  poverty,  and  ignorance  that  then  prevailed. 

The  civilized  and  individualistic  nations  of  the  world 
realize  this  and  are  making  strong  efforts  so  to  improve  and 
better  the  conditions  of  the  working  classes  that  the  appeal 
of  Bolshevism  will  fall  dead  on  their  ears. 

Higher  Standards  of  Living 

One  certain  result  of  this  agitation  will  be  that  the  work- 
ing classes  of  every  country  will  attain  to  wider  participation 
in  politics  and  industry,  and  will  secure  greater  privileges  and 
a  greater  share  in  the  earnings  of  capital.  The  average  man 
in  other  nations,  as  well  as  in  our  own  country,  will  have  more 
money  to  spend,  he  will  provide  himself  and  his  family  with 
greater  comforts,  and  he  will  be  able  and  eager  to  purchase 
luxuries  to  the  extent  of  his  earnings.  This  translated  into 
the  language'  of  foreign  trade  signifies  that  the  average  man 
abroad  will  want  every  commodity  and  luxury  which  the 
average  man  in  other  countries  may  have  and  which  he 
has  not  and  that  also  he  will  be  better  able  to  pay  for  them 
than  ever  before. 

What  the  present  labor  unrest  means  is  that  both  soldier 
and  worker  have  glimpsed  higher  standards  of  life  and  living 
and  that  for  themselves  and  their  famihes  they  mean  to  hold 
fast  what  vantage  ground  they  have  gained,  and  strive  for 
more. 

It  also  seems  as  if  the  more  intelligent  capitalists  appre- 
ciate this  attitude  of  the  workers  and  sympathize  with  their 
aspirations  for  better  things.  Under  these  circumstances  it  is 
likely  that  the  world  will  see  a  new  order  in  which  the  demand 
for  the  necessaries,  the  comforts,  and  the  conveniences  of 
civilized  life  will  be  for  quantities  and  varieties  heretofore 
unknown  in  the  history  of  production.  The  markets  of  the 
world  will  be  enlarged  and  extended  beyond  precedent  and 


82  GENERAL   CONSIDERATIONS 

the  opportunities  for  the  merchant  in  foreign  trade  will  be 
multiplied  marvelously. 

The  Breaking  Down  of  Barriers 

The  increase  of  demand,  the  expansion  of  trade,  and  the 
resulting  interchange  of  ideas  and  intelligence  will  have 
another  momentous  effect.  The  economic  co-operation  and 
international  exchange  of  commodities  will  tend  to  break 
down  the  hindrances  and  obstacles  that  now  exist.  Like  water 
seeping  through  an  obstructing  wall,  increasing  volumes  of 
trade  will  disintegrate  and  break  down  the  barriers  that  now 
obstruct  and  make  trade  difficult. 

Hitherto  the  interchange  of  commodities  between  the 
nations  of  the  world  has  been  hampered  by  lack  of  uniformity 
of  laws,  by  high  tariff  and  other  protectionist  barriers,  by 
preferential  treaties  (both  secret  and  open)  and  by  govern- 
mental interference  with  transportation  and  selling  methods. 
If  these  hindrances  to  free  commerce  are  to  be  done  away 
with  and  the  nations  of  the  earth  are  to  be  allowed  liberty 
to  compete  with  each  other  on  equal  terms  throughout  the 
world  as  they  do  in  their  own  country,  the  impetus  given  to 
foreign  trade  will  be  tremendous.  Such  a  course  is  the  logi- 
cal result  of  the  now  visibly  developing  rapprochement  of 
the  people  of  different  races  in  every  part  of  the  globe. 

The  Present  Economic  Situation 

The  United  Stsates  is  a  large  creditor  of  the  world's  strong- 
est nations.  She  has  made  a  very  substantial  contribution 
towards  the  world's  freedom  from  autocratic  and  militaristic 
dominion.  Many  small  nations  are  grateful  to  her  for  their 
liberties. 

The  economic  situation  of  the  world  from  the  standpoint 
of  finance  is  that  smaller  nations  are  financially  obligated  to 
larger  nations  and  many  of  them  are  obligated  to  the  United 


THE  FUTURE  OF  FOREIGN  TRADE        83 

States  of  America.  If  there  were  no  other  reasons  the  world 
sentiment  and  the  world  financial  indebtedness  in  our  favor 
would  be  sufficient  to  obtain  for  us  just  concessions  to  our 
exporters,  from  every  nation  which  sided  with  the  AlHes. 

These,  however,  are  not  the  only  reasons.  What  we  gave, 
we  gave.  It  belongs  to  the  past.  Sometimes  a  gift  or  a  loan 
is  gratefully  received  and  then  quickly  forgotten.  But  what 
we  are  yet  to  give  is  what  concerns  us.  The  world  has  been 
hungry  and  almost  naked  for  years.  Many  small  nations 
have  suffered  slavery  for  centuries.  The  world  wants  to  be 
fed,  clothed,  and  enabled  to  enjoy  its  newly  begotten  free- 
dom. It  looks  to  America  for  assistance,  to  America  the  great 
hope  of  humanity,  the  ever-constant  friend  of  the  oppressed, 
America  basking  in  affluence,  blessed  with  riches  never 
dreamed  of  even  by  the  ancient  kings.  And  America  is  ex- 
pected to  respond  kindly  and  generously,  if  not  lavishly.  The 
necessity  laid  on  the  nations  of  the  world  to  come  to  America 
for  that  which  they  need  will  open  up  channels  of  trade  that 
if  we  do  our  part  need  never  afterwards  be  closed. 

There  will  be  for  some  years  to  come  a  great  multitude  of 
buyers  in  every  country.  They  will  clamor  with  outstretched 
hands  for  everything  this  country  has  to  sell.  In  the  begin- 
ning they  will  have  but  little  money;  not  only  their  govern- 
ments but  most  of  their  financial  and  mercantile  institutions 
will  beg  for  credit.  Their  natural  resources — mines,  forests, 
fields — as  well  as  their  municipalities,  r*ailroads,  and  indus- 
tries, all  will  need  capital  for  development.  Here  is  the  un- 
paralleled opportunity  in  all  history  for  one  nation  not  only 
to  do  good  to  the  rest  but  in  doing  it  to  prosper  and  accumulate 
wealth  and  economic  power. 

Government  Aid  to  Trade  Expansion 

Our  government  should  arrange  to  extend  credit  and  other 
facilities  to  foreign  peoples.    It  should  provide  the  most  favor- 


84  GENERAL   CONSIDERATIONS 

able  business  conditions  for  our  bankers,  our  financiers,  our 
manufacturers,  our  exporters,  and  for  all  other  national 
factors  having  any  dealings  of  an  international  character. 
Our  commerce  should  be  placed  in  a  specially  favored  and 
privileged  position  with  every  people  who  desire  to  avail 
themselves  of  our  national  economic  aid.  If  this  is  done  we 
shall  have  another  potent  factor  in  our  favor. 

Sociological  Aspects 

It  is  easily  seen  that  the  sociological  trend  of  the  mod- 
ern world  points  also  most  auspiciously  in  our  favor.  This 
is,  if  not  a  new,  at  least  a  renovated  world  in  which  we  are 
now  living.  A  glance  at  the  map  of  Europe  shows  countries 
scarcely  heard  of  in  recent  years — Bohemia,  Poland,  and 
Ukrainia.  The  dead  have  risen,  impelled  with  new  life  and  the 
vigor  of  youth.  These  countries  need  a  guide,  counselor,  and 
friend,  as  much  as  they  need  economic  assistance.  They 
admire  America;  they  are  most  grateful  for  the  help  it  ren- 
dered to  them.  They  want  us  with  them  in  preference  to 
any  other  nation,  for  our  ideals  are  their  ideals. 

But  this  is  not  all.  For  generations  the  people  of  these 
races  have  been  migrating  to  America  until  we  number  mil- 
lions of  them  in  our  citizenship.  These  millions,  too,  are 
impregnated  with  American  ideals.  Many  of  them  will  go 
back  to  their  old  homes.  Is  it  not  natural  to  suppose  that 
they  will  carry  with  them  a  love  for  America  and  an  appre- 
ciation of  American  civilization,  while  those  of  their  fellow 
countrymen  who  remain  here  will  inevitably  add  their  in- 
fluence in  our  favor? 

Such  signs  as  these  speak  one  language  and  point  to  one 
conclusion ;  American  civilization  will  be  the  most  favored 
civilization  among  the  newly  created  nations  of  the  old 
Europe.  In  the  language  of  trade  this  means  that,  by  adopt- 
ing our  ways  land  our  methods  of  life,  the  nations  under  dis- 


THE  FUTURE  OF  FOREIGN  TRADE        85 

ctission  will  want  all  the  material  blessings  of  our  civilization 
which  we  have  on  sale.  Their  social  aspirations  will  be  akin 
to  ours  and  our  civilization  will  be  widely  emulated. 

If  this  is  true  in  one  respect,  it  may  be  true  in  other  re- 
spects. If  they  want  our  products,  they  may  be  willing  to 
accept  our  methods  of  distribution.  Intense  commercial  activ- 
ity is  bound  to  come  and  each  nation  will  become  a  veritable 
beehive  of  mercantile  life.  If  we  can  go  into  these  new  coun- 
tries and  install  our  methods,  there  will  be  willing  hands  to 
assist  us  and  willing  minds  to  follow  us. 

The  democratization  of  the  entire  world  in  which  the 
American  civilization  will  be  a  very  influential  if  not  a  pre- 
dominant factor  may  safely  be  predicted.  Whatever  may  be 
the  course  of  world  affairs — politically,  economically,  socio- 
logically— the  citizens  of  this  country  may  rest  assured  that 
they  will  be  in  a  most  advantageous  position. 


PART   II 
MACHINERY    OF    FOREIGN    TRADE 


CHAPTER    XII 

THE  EXPORTER  AND  HIS  STAFF 

World  Trade  Machinery 

The  trade  machinery  which  keeps  the  world's  commerce 
in  motion  is  composed  of  certain  factors,  the  functions  and 
interrelations  of  which  must  be  considered.  These  factors 
may  be  grouped  as  follows: 

1.  The  exporter  and  his  staff 

2.  The  importer  and  his  staff 

3.  Foreign  trade  auxiliaries 

The  machinery  of  exporting  so  runs  into  the  machinery  of 
importing  that  it  is  difficult  to  distinguish  the  separate  func- 
tioning of  each.  For  convenience  certain  dements  will  be 
discussed  as  a  part  of  the  exporter's  staff  which  are  equally 
applicable  to  the  importer,  and  some  which  might  be  classed 
under  all  of  the  three  heads  given  above. 

The  Exporter 

Classes  of  Exporters 

Anyone  engaged  in  selling  goods  for  export  may  properly 
be  called  an  exporter,  but  in  its  commonest  application  the  term 
suggests  either  the  manufacturer  who  sells  his  product  abroad 
or  the  individual  or  firm  selling  on  its  own  account  or  for  a 
third  party. 

Exporters  may  be  classed  according  to  their  functions  as: 

1.  The  producer  for  export 

2.  The  export  commission  house 

89 


90  MACHINERY    OF   FOREIGN    TRADE 

3.  The  export  merchant 

4.  The  export  agent 

5.  The  co-operative  export  organization 

The  Producer  for  Export 

The  producer  for  export  may  be  a  manufacturer,  or  he 
may  be  the  owner  of  natural  resources,  such  as  mines,  oil  wells, 
or  forests,  or  of  the  products  of  the  soil,  such  as  cotton,  wheat, 
live  stock,  etc.  He  may  export  his  product  through  one  of 
the  other  export  factors  or  he  may  do  it  through  his  own 
export  department,  this  latter  procedure  being,  as  yet,  the  ex- 
ception rather  than  the  rule.  International  trade  in  raw  mate- 
rial goes  on  through  well-defined  channels  and  requires  no 
intricate  export  mechanism  to  handle  it.  The  producer  of 
finished  merchandise  usually  has  a  more  complicated  task. 
Unless  he  is  satisfied  with  very  slow  progress,  the  manufac- 
turer must  take  definite  steps  either  to  push  his  foreign  sales 
himself  or  to  use  other  agencies  in  the  trade  to  that  end. 

The  Export  Commission  House 

The  export  commission  house  and  the  export  merchant  are 
usually  confused  in  the  public  mind.  They  are  not  identical. 
The  commission  house  buys  goods  for  a  foreign  client  and 
charges  a  commission  for  the  service;  it  cultivates  trade  only 
in  foreign  countries,  does  not  deal  with  other  houses,  and 
should  not  be  considered  as  a  broker  in  any  sense  of  the  word. 

There  are  about  one  thousand  commission  houses  in  the 
United  States,  two-thirds  of  which  are  in  New  York  City. 
They  are  of  particular  importance  to  the  manufacturer,  be- 
cause they  handle  nearly  70  per  cent  of  all  the  exports  of  the 
United  States.  In  a  legal  sense  they  are  agents  acting  for 
their  principal  for  a  compensation  called  commission  or  fac- 
torage. It  is  neither  legal  nor  proper  for  a  commission  house 
to  receive  a  commission  from  both  parties  to  the  same  transac- 


THE    EXPORTER   AND    HIS    STAFF  91 

tion,  although  there  is  nothing  to  prevent  its  also  acting  as  an 
agent  for  an  exporter  in  the  sale  of  his  merchandise  abroad. 
In  fact  it  often  acts  both  in  this  capacity  and  as  an  agent  for 
a  foreign  buyer.  The  commissions  vary  from  2^  to  5  per 
cent. 

The  large  export  commission  houses  of  this  country  are 
exceedingly  useful  adjuncts  to  foreign  trade  and  their  activi- 
ties should  not  be  discouraged.  This  does  not  mean  that  our 
manufacturers  should  always  depend  entirely  upon  commis- 
sion houses  for  their  orders  as  they  do  now.  Any  business 
man  with  ordinary  business  judgment  and  sagacity  can  see 
that  the  orders  coming  to  him  through  the  commission  houses 
will  never  build  for  him  an  independent  or  permanent  export 
trade.  He  will  also  see  that  usually  it  will  pay  him  best  not 
to  ignore  this  source  of  business  supply,  but  on  the  contrary 
to  cultivate  the  acquaintance  and  the  good-will  of  the  repre- 
sentative exporters. 

The  Commission  House  as  Buying  Agent 

The  commission  house  is  the  buying  agent  for  foreign  mer- 
chants ;  this  is  its  proper  function.  When  it  starts  to  buy-  on 
its  own  account  and  to  send  salesmen  throughout  the  world, 
it  becomes  a  sort  of  international  department  store  and  devi- 
ates from  its  true  sphere. 

Not  infrequently,  the  manufacturer  finds  a  buyer  abroad 
who  will  give  him  an  order  only  through  his  commission  mer- 
chant in  the  producer's  country.  In  that  case  it  is  customary 
to  ask  the  buyer  to  send  a  duplicate  order  to  the  factory,  so 
as  to  make  sure  that  the  order  will  be  executed  according  to 
directions,  and  incidentally  that  the  order  itself  will  be  trans- 
mitted to  the  manufacturer  by  the  local  commission  house. 

There  are  numerous  reasons  why  a  buyer  abroad  often 
prefers  to  deal  through  the  commission  house.  If  he  buys 
much  and  in  a  great  variety  it  saves  him  much  correspondence, 


92  MACHINERY    OF   FOREIGN    TRADE 

expedites  matters,  and  makes  it  possible  to  have  various  con- 
signments shipped  on  the  same  bill  of  lading,  with  possibly  a 
saving  of  freight  and  cartage,  to  say  nothing  of  trouble.  The 
purchaser  is  likely  to  be  acquainted  with  the  commission  house, 
which  perhaps  has  a  branch  in  his  town.  He  can  look  to  this 
house  for  responsibility  if  anything  goes  wrong  with  the  order 
or  the  shipment.  But  perhaps  the  most  important  reason  of 
all  is  that  the  export  house  will  give  him  the  credit  which,  in 
most  cases,  the  American  manufacturer  will  refuse. 

There  are  also  certain  advantages  for  the  manufacturer  in 
dealing  through  the  export  commission  house.  The  transac- 
tion is  like  any  other  domestic  transaction,  for  the  export  house 
is  practically  the  purchaser.  The  business  entails  no  extra- 
ordinary expense,  and  the  manufacturer  is  always  sure  of  his 
money  as  soon  as  he  executes  the  order. 

The  Export  Merchant 

There  are  very  few  real  export  merchants  in  this  country, 
although  they  are  fairly  numerous  and  important  abroad,  some 
of  them  merely  loaning  money  to  importers  in  foreign  mar- 
kets. Many  commission  houses  stock  goods  and  sell  from 
these  stocks  and  in  this  sense  may  be  called  export  merchants. 

The  more  important  export  merchants  sometimes  maintain 
very  extensive  organizations,  having  numerous  offices  abroad, 
employing  traveling  salesmen,  issuing  magazines,  and  even 
owning  and  operating  steamship  lines.  They  are  always  to 
be  considered  as  acting,  not  for  the  producer  or  the  purchaser, 
but  for  themselves. 

The  Export  Agent 

An  export  agent  does  not  act  for  the  buyer  as  does  the 
export  commission  house,  but  for  the  seller,  usually  charging 
the  latter  a  commission  on  all  his  foreign  sales.  Generally  an 
export  agent  specializes  in  some  one  line  of  products,  such  as 


THE  EXPORTER  AND   HIS    STAFF 


93 


paper,  hardware,  copper,  etc.  Most  frequently  he  also  con- 
fines his  operations  to  a  certain  locality — some  operating  ex- 
clusively in  South  American  markets,  others  in  the  Far  East, 
and  so  on.  In  New  York  City  there  are  a  number  of  success- 
ful foreign  selling  agencies  which  operate  on  a  large  scale, 
maintaining  many  foreign  offices  and  having  extensive  con- 
nections among  foreign  buyers. 

Co-operative  Export  Organizations 

There  are  a  few  co-operative  export  organizations  which 
are  maintained  as  the  export  departments  of  non-competing 
manufacturers,  but  this  method  of  promoting  export  business 
has  not  yet  come  into  its  own  among  the  American  producers. 
Nevertheless,  in  many  cases  it  is  not  only  the  best  but  the  only 
practical  method  for  the  extension  of  export  trade.  In  Eng- 
land, France,  and  Germany,  co-operative  selling  organizations 
have  been  very  popular  and  are  doing  a  prosperous  and  suc- 
cessful business. 

The  Exporter's  Staff 
The  Export  Manager 

The  export  manager  is  an  all-important  personage  in  ex- 
port trade,  and  no  concern  engaged  largely  in  such  trade  can 
safely  dispense  with  him.  "Export  manager"  does  not  fully  de- 
scribe his  calling,  which  is  oftentimes  more  complicated  than 
the  title  would  indicate.  His  duties  depend  upon  the  size  of 
the  concern  employing  him,  and,  to  some  extent,  upon  the  trade 
strategy  of  his  employer. 

If  the  concern  is  small,  the  export  manager  may  combine 
within  himself  the  functions  of  foreign  correspondent,  ship- 
ping clerk,  traffic  manager,  advertising  expert,  sales  manager, 
export  agent,  and  eastern  manager.  Ordinarily  he  is  expected 
to  cultivate  the  acquaintance  of  export  commission  men  and 
brokers,  attend  to  shipments  of  merchandise  at  the  port  of 


f)4  MACHINERY   OF  FOREIGN   TRADE 

exit,  and  occasionally  write  an  advertisement  for  insertion  in 
some  local  export  publication.  This  is  his  usual  work,  not 
because  his  profession  does  not  call  for  a  larger  field  and  more 
important  duties,  but  because  his  employer  is  too  often  of  the 
class  who  either  cannot  or  dare  not  enter  export  activities  on 
a  larger  scale,  depending,  for  the  time  being  at  least,  upon  the 
local  commission  houses  and  resident  buyers  of  foreign  houses 
for  his  export  orders. 

There  are  several  classes  of  these  export  managers  but  the 
type  just  described  is  fairly  representative.  The  theory  on 
which  many  of  these  boys  (for  they  are  usually  very  young 
men)  are  put  in  their  positions  is  that  they  are  honest,  per- 
severing, and  "good  mixers."  It  is  believed  that  even  though 
they  have  not  an  extensive  acquaintance  among  export  com- 
mission houses  they  can  soon  develop  such  an  acquaintance, 
that  because  of  their  perseverance  and  honesty  they  can  learn 
the  business  and  that  they  will  stick  to  their  jobs.  There  is  no 
good  reason  known  why  men  of  greater  education  and  ability 
should  not  be  anxious  to  enter  this  field,  which  offers  really 
large  opportunities.  It  is  certain  that  many  large  concerns 
would  be  ready  to  employ  them  on  favorable  terms. 

The  Director  of  Foreign  Sales 

There  is  another  class  of  men  sometimes  called  export  man- 
agers. These  are  the  men  of  large  caliber  who  are  usually 
given  reponsible  offices,  such  as  vice-president  or  secretary. 
Their  function  also  is  to  cultivate  the  acquaintance  of  export 
commission  houses  and  resident  buyers,  but  that  is  only  a  small 
part  of  their  activities,  for  they  usually  have  complete  charge 
of  selling  campaigns  in  different  sections  of  the  world.  They 
supervise  agencies,  correspond  with  customers,  and  negotiate 
sales  directly  from  the  factory.  In  addition  to  all  this  they 
usually  manage  a  large  force  of  local  employees,  salesmen, 
managers,  and  agents. 


THE   EXPORTER   AND   HIS   STAFF  95 

The  Foreign  Trade  Manager 

The  foreign  trade  manager  is  usually  a  man  of  consider- 
able education  and  large  experience  in  foreign  trade,  familiar 
with  a  number  of  foreign  languages,  and  who  has  traveled  and 
sold  goods  abroad.  He  has  secured  his  position,  as  a  rule,  by 
first  winning  his  spurs  in  the  field.  These  men  are  high-priced 
and  only  concerns  conducting  operations  in  foreign  markets 
on  a  very  large  scale  can  afford  to  employ  them.  Oftentimes 
they  have  left  lucrative  positions  abroad  or  in  the  government 
service  to  fill  this  office.  The  term  ''foreign  trade  manager"  is 
better  known  among  importers  who  often  have  such  a  man  as 
manager  of  a  foreign  department.  There  is  reason  to  believe 
that  the  time  is  approaching  when  the  larger  exporters  will 
replace  the  export  managers  of  the  type  first  described  by  for- 
eign trade  managers  who  will  have  charge  of  imports  as  well 
as  exports. 

The  Manufacturer's  Export  Representative 

The  manufacturer's  export  representative  is  the  name  given 
to  the  agent  of  the  manufacturer  who  attends  to  his  foreign 
shipments  and  solicits  orders  for  him  from  the  local  commis- 
sion houses.  Such  agents  frequently  represent  more  than  one 
house.  The  arrangement  is  not  generally  satisfactory  and  the 
concerns  employing  such  persons  are  usually  beginners  in  for- 
eign trade. 

The  Correspondent 

The  correspondent  is  also  an  indispensable  adjunct  of  the 
world's  trade.  Knowledge  of  languages  alone  does  not  make 
a  competent  correspondent,  even  though  such  knowledge  in- 
cludes all  the  refinements  of  correspondence  used  in  the  coun- 
try with  which  he  is  employed  to  deal.  The  right  kind  of 
correspondent  must  possess  some  of  the  qualities  of  a  high- 


96  MACHINERY   OF  FOREIGN   TRADE 

class  international  salesman,  for  his  chief  aim  is  not  only  to 
answer  inquiries  and  to  cultivate  clients  by  mail,  but  to  initiate 
and  conduct  correspondence  with  a  view  to  selling  merchan- 
dise. Particularly  important  is  this  in  the  case  of  the  concern 
employing  a  correspondent  to  conduct  active  selling  campaigns 
by  means  of  circular  letters,  the  distribution  of  catalogues,  etc. 
The  proper  function  of  a  foreign  correspondent  is  really 
mail  order  salesmanship.  Of  course,  he  may  be  made  merely 
an  adjunct  of  the  sales  manager,  but  in  such  a  case  the  man- 
ager, as  well,  must  know  something  of  the  language  and  the 
people  with  whom  he  is  dealing. 

Translators 

Translators  are  not  usually  accorded  the  importance  due 
them,  and  therefore  it  may  not  be  out  of  place  to  point  out  the 
fact  that  many  a  deal  has  fallen  through  because  of  the  trans- 
lator's errors  in  translating  the  original  copies  of  correspon- 
dence. Every  careful  business  man  knows  the  importance  of 
placing  an  exact  interpretation  upon  propositions  which  pass 
between  buyer  and  seller.  Clumsy  translation  not  only  fails 
to  carry  out  the  original  meaning  but  is  apt  to  distort  it  in  such 
a  way  as  to  give  it  a  meaning  that  is  quite  different.  A  reli- 
able translator  must  be  thoroughly  familiar  with  both  lan- 
guages— the  one  he  translates  and  the  language  into  which  he 
is  translating — otherwise  he  is  apt  to  create  mischief.  Techni- 
cal dictionaries  are  now  available  in  most  industries  and  in  the 
principal  foreign  languages.  Such  a  dictionary  should  be 
possessed  by  the  average  translator  in  addition  to  whatever 
first-hand  knowledge  of  the  language  he  may  have,  because 
of  the  great  number  and  variety  of  trade  and  technical  terms 
employed  in  ordinary  business  transactions. 

There  are  many  poor  translators,  not  because  they  do  not 
know  one  language  well,  but  because  they  rarely  know  two 
languages  equally  well.     Still,  with  a  little  care  and  business 


THE   EXPORTER  AND   HIS   STAFF  97 

tact,  a  competent  translator  should  be  readily  obtained, 
though  it  is  a  good  plan  to  have  another  man  familiar  with  the 
foreign  language  to  verify  the  translation,  especially  at  the 
outset. 

The  Co-operative  Salesman 

The  salesman  is,  in  a  sense,  the  most  important  member  of 
the  exporter's  staff.  On  him  depends  the  ultimate  success  or 
failure  of  the  enterprise.  The  remainder  of  the  staff  exists 
to  direct  and  support  his  efforts  and  to  fill  his  orders.  The 
requirements  and  procedure  of  international  salesmanship  will 
be  dealt  with  in  a  later  chapter.  Here  but  a  single  type  of 
agent  is  considered — the  co-operative  salesman.  This  repre- 
sentative may  be  an  international  itinerant  merchant  work- 
ing independently,  or  he  may  be  the  representative  of  an 
export  commission  house.  Most  frequently  he  represents  a 
number  of  manufacturers  in  non-conflicting  lines,  and  goes 
abroad  in  the  capacity  of  their  agent.  He  carries  and  dis- 
tributes their  samples  and  generally  advertises  the  wares  of 
his  principals  wherever  he  goes.  For  these  labors  he  receives 
a  small  expense  allowance  from  his  employers,  but  frequently 
he  finances  himself  and  works  purely  on  a  commission  basis. 

It  is  a  well-established  theory  that  the  seller,  to  hold  his 
customers,  must  at  stated  intervals  either  visit  the  territory 
himself  or  send  his  personal  representative.  This  theory  is 
put  into  practical  effect  by  the  co-operative  salesman,  who  be- 
comes acquainted  with  the  customers  of  the  houses  which  he 
represents,  collects  credits  and  market  information  and  keeps 
his  employers  posted  on  the  conditions  existing  in  a  particular 
territory. 

When  the  manufacturers  in  the  United  States  have  fully 
realized  the  benefits  of  co-operation  in  foreign  trade,  co-oper- 
ative salesmen  will  become  more  potent  factors  in  the  promo- 
tion of  international  trade.     Until  that  time  the  position  will 


98  MACHINERY   OF   FOREIGN   TRADE 

continue  to  be  one  of  hard  pioneer  work,  and  of  its  kind  not 
the  most  remunerative. 

Local  Selling  Agent 

The  employment  of  local  selling  agents  is  an  old  and  well- 
established  custom  with  foreign  traders.  European  manufac- 
turers use  them  almost  universally,  and  the  advantages  of  the 
practice  are  obvious.  A  good  local  agent  knows  his  people, 
their  methods  of  business,  their  needs,  and  their  financial 
standing.  He  is  able  to  adjust  misunderstandings  between  the 
exporter  and  his  customer,  and  his  presence  on  the  ground  in- 
variably results  in  the  saving  of  much  time  and  inconvenience, 
whatever  the  nature  of  the  transaction. 

The  chief  difficulty  is  to  find  the  right  representative.  Men 
with  the  requisite  character,  selling  ability,  and  discretion,  who 
can  grasp  their  employers'  points  of  view,  who  can  make  the 
most  of  their  favorable  position  on  the  ground  so  as  to  take 
advantage  of  local  opportunities  as  they  occur,  who  can  be 
trusted  to  grade  prices  to  suit  the  exigencies  of  the  moment, 
and  to  keep  abreast  of  the  operations  of  their  competitors,  are 
not  numerous  in  any  market  whether  domestic  or  foreign.  If 
the  exporter  is  fortunate  enough  to  find  such  a  man  he  will 
be  worth  all  he  costs. 

The  Shipping  Clerk 

The  shipping  clerk  is  an  important  link  in  foreign  trade. 
He  has  full  charge  of  preparing  goods  for  shipment,  which 
means  packing,  marking  the  cases,  attending  to  all  the  shipping 
documents,  consular  formalities,  transportation  of  shipments 
to  the  vessel — in  fact,  of  everything  from  the  time  the  mer- 
chandise is  collected  for  packing  until  it  is  practically  on  board 
the  vessel.  Sometimes  he  also  performs  the  function  of 
traffic  manager,  selecting  routes  and  making  all  arrangements 
with  steamship  companies  for  transportation.     It  depends  on 


THE   EXPORTER   AND   HIS   STAFF  99 

the  business  of  the  company  employing  him,  whether  his  func- 
tions are  general  or  intensive  and  consequently  more  special- 
ized. If  the  company  does  a  very  large  business,  he  may  only 
get  the  consignments  together  and  into  the  hands  of  the  steam- 
ship company;  if  the  business  is  comparatively  small  the  ship- 
ping clerk  may  have  to  give  his  attention  to  everything,  includ- 
ing the  duties  of  the  bookkeeper  and  messenger  boy. 

The  responsibilities  of  a  shipping  clerk  in  a  small  concern 
are  not  so  numerous  as  in  a  large  manufacturing  or  export 
commission  concern,  but  his  position  is  a  very  responsible  office 
just  the  same.  A  manufacturer'  looking  for  an  export  ship- 
ping clerk  can  find  the  best  trained  men  in  the  large  export 
commission  houses,  and  if  he  cannot  pay  enough  to  induce  an 
old  employee  of  such  a  house  to  work  for  him,  the  best  he  can 
do  is  to  train  one  of  his  promising  young  men  in  the  office  of 
some  export  house,  or  of  some  transportation  company  en- 
gaged in  international  business  on  a  large  scale. 

Numerous  customers  have  been  lost  by  American  manu- 
facturers because  their  goods  were  not  properly  packed, 
marked,  or  shipped.  In  fact,  until  this  branch  of  foreign 
service  becomes  more  efficient  and  more  specialized,  we  cannot 
become  leaders  in  the  world's  commerce. 

The  Traffic  Manager 

The  traffic  manager  should  know  all  that  a  shipping  clerk 
knows,  and  in  addition  to  that  he  must  know  how  to  route 
freight.  In  foreign  trade  he  must  know  thoroughly  all  the 
steamship  companies,  their  rates,  their  facilities,  and  their  re- 
quirements. He  must  know  the  railways  connecting  the  fac- 
tory with  the  port  of  shipment,  if  he  is  a  traffic  manager  for  a 
manufacturing  concern;  if  he  works  for  an  export  house,  he 
should  also  know  the  railways  connecting  the  harbors  of  the 
world  with  the  interior.  This  position  is  one  of  great  respon- 
sibility and  requires  considerable  education  and  special  train- 


lOO  MACHINERY    OF    FOREIGN    TRADE 

ing,  as  well  as  natural  ability.  It  is  surprising  that  not  until 
recently  have  the  colleges  and  commercial  schools  of  this 
country  offered  practical  courses  in  transportation  and  ship- 
ping. Even  now  but  very  few  such  courses  include  foreign 
as  well  as  domestic  transportation.  The  graduates  of  schools 
that  offer  proper  training  in  these  subjects  will  have  no  diffi- 
culty in  obtaining  positions  as  traffic  managers. 

Advertising  Expert 

American  trade  expansion  is  suffering  from  lack  of  adver- 
tising men  familiar  with  advertising  methods  and  principles 
applicable  to  foreign  lands.  From  the  standpoint  of  learning 
alone,  there  is  no  reason  why  an  advertising  expert  could  not 
be  developed  who  is  versed  in  foreign  advertising  pertaining 
not  to  any  one  particular  country,  but  to  every  country  of 
the  world. 

The  function  of  the  advertising  specialist  need  not  be 
described  at  length  here.  Stated  briefly,  his  business  is  to 
manage  the  distribution  of  merchandise  by  means  of  publicity, 
and  the  methods  by  which  this  is  accomplished  are  discussed 
in  Chapter  XXX,  "Advertising  in  Foreign  Trade." 


CHAPTER    XIII 

IMPORTING  AND  THE  BIPORTER 

Interrelation  of  Exports  and  Imports 

Much  stress  is  commonly  laid  upon  our  export  trade,  but 
our  imports  are  seldom  mentioned.  It  is  not  surprising  that 
there  is  still  a  popular  assumption  that  the  greater  the  excess 
of  our  exports  over  our  imports,  the  better  it  is  for  the  United 
States.  This  is  a  fallacy.  Those  who  leave  the  subject  of 
imports  out  of  their  definition  of  foreign  trade,  forget  that 
there  is  essentially  no  real  difference,  from  the  economic 
standpoint,  between  the  trading  people  of  foreign  countries  and 
the  traders  of  the  same  community.  When  we  try  to  show 
our  prosperity  by  quoting  the  excess  in  the  value  of  our 
exports  over  our  imports,  we  forget  that  we  pay  annually 
millions  of  dollars  to  foreigners  on  the  investments  which 
they  have  made  here  and  in  interest  on  the  money  which  we 
have  borrowed  abroad  and  that  each  year  other  millions  are 
sent  abroad  by  the  aliens  in  America.  The  money  thus  sent 
out  of  the  country  when  properly  compiled  would,  in  a  large 
measure,  offset  the  boasted  excess  of  our  exports  over  our 
imports.  We  shall  not  be  able  to  understand  the  subject  of 
exports  and  imports  nor  to  draw  the  line  between  the  two, 
unless  we  realize  that  both  are  necessary  to  the  prosperity  of  a 
country  and  the  happiness  of  its  people. 

The  people  abroad  cannot  continue  to  buy  unless  they  can 
also  sell,  for  the  money  which  they  pay  for  our  goods  must 
be  made  in  the  production  and  sale  of  their  raw  materials  and 
the  commodities  which  they  manufacture.  It  is  an  economic 
Impossibility  for  a  nation  to  be  solely  an  exporter.    The  trade 

lOI 


102  MACHINERY   OF   FOREIGN   TRADE 

of  the  world  is  based  upon  the  exchange  of  commodities,  and 
"reciprocity"  is  the  watchword  of  international  commerce. 

It  is  also  a  false  assumption  that  all  the  money  which  is 
paid  for  imported  products  necessarily  goes  out  of  the  country. 
What  of  the  millions  of  dollars  which  the  importer  of  foreign 
goods  spends  in  advertising  in  American  publications?  What 
of  the  profits  earned  from  their  sale  by  American  jobbers  and 
retailers?  What  of  the  money  the  importer  spends  in  trans- 
porting his  goods  by  American  carriers?  What  of  the  revenue 
he  pays  to  sustain  our  government?  Nor  is  this  all,  for  as 
soon  as  his  business  warrants  it,  the  foreign  exporter  often 
establishes  an  American  factory  and,  importing  material  only, 
spends  more  money  in  wages  to  American  employees. 

We  cannot  reap  profits  indefinitely  on  the  sale  of  goods  in 
any  foreign  country  unless  we  buy  commodities  in  return.  It 
is  a  good  policy  for  an  international  trader  to  buy  from  that 
country  in  which  he  sells  so  far  as  it  is  consistent  with  his 
financial  interest. 

The  Utility  of  Imports 

Aside  from  monetary  considerations  imports  have  another 
significant  function  to  perform.  They  satisfy  the  wants  of  the 
people  and  contribute  to  their  happiness.  There  are  many 
things  which  we  have  grown  to  consider  indispensable  which 
cannot  under  existing  conditions  be  produced  in  this  country. 
Coffee,  tea,  fruits,  and  many  other  food  products,  common 
utilities  like  rubber,  or  medicinal  products  like  opium,  are  all 
of  foreign  origin.  Even  the  money  which  is  sent  out  to  for- 
eign countries  is  a  source  of  profit  to  the  banks  through  the 
sale  of  drafts  and  letters  of  credit. 

To  become  efficient  in  international  commerce  one  should 
become  accustomed  to  take  broad  views  and  to  form  correct 
ideas  of  the  object  and  the  end  of  all  barter,  which  is  not 
merely  to  make  money.    Money,  as  a  thing  by  itself,  is  useless. 


IMPORTING  AND   THE  IMPORTER  103 

It  is  good  only  to  the  extent  that  it  can  be  used  to  buy  other 
things  desired.  It  is  a  medium  of  exchange  with  which  one 
can  procure  what  the  heart  desires. 

In  a  crude  state  of  hfe  money  was  of  Httle  value,  for  in 
that  state  man's  needs  were  few  and  simple  and  his  desires 
were  limited.  As  he  began  to  Hve  in  a  state  of  refinement  and 
culture,  he  began  to  develope  artistic  tastes,  to  crave  amuse- 
ments, and  to  demand  luxuries — the  lady  a  silk  gown,  the  man 
a  high-powered  automobile.  Some  of  these  things  cannot  be 
obtained  in  this  country.  Rubber  from  which  automobile 
tires  are  made,  and  raw  silk  for  milady's  gown,  must  be 
brought  from  overseas.  Here  are  the  desires  and  here  is  the 
money,  but  we  must  go  abroad  to  buy  the  things  which  our 
environment  has  taught  us  to  want.  Were  we  to  be  deprived 
of  the  things  which  foreigners  sell  us,  all  the  money  in  the 
world,  if  placed  at  our  disposal,  would  hardly  enable  us  to 
satisfy  our  desires  for  these  things. 

International  Exchange  of  Commodities 

The  farmer  who  grows  grains  and  vegetables  and  raises 
animals  in  excess  of  the  supply  required  for  his  own  house- 
hold needs,  sells  to  others  what  he  cannot  use  himself.  But  he 
needs  sugar  and  coffee,  a  new  collar  now  and  then,  and  perhaps 
some  dresses  for  his  wife  and  daughters.  These  he  does  not 
produce  on  his  farm,  so  he  buys  them  in  town  or  exchanges 
them  for  his  farm  products  which  he  takes  to  the  village 
storekeeper. 

Exactly  the  same  principle  is  involved  in  the  case  of  na- 
tions. Each  country  produces  certain  commodities  and  sells 
to  foreign  countries  the  quantity  that  it  does  not  consume 
itself.  Each  buys  from  other  countries  those  commodities 
which  are  not  produced  at  home  or  are  produced  in  an  amount 
that  is  not  adequate  to  supply  all  the  needs  of  its  people  and 
thus  the  exchange  goes  on  everywhere  and  forever. 


104 


MACHINERY    OF   FOREIGN    TRADE 


Dividing  Lines — Legal  and  Economic 

The  lines  that  divide  the  exports  and  imports  are  many  in 
theory,  but  in  reality  are  non-existent.  Both  are  the  offspring 
of  human  needs  and  desires  and  both  are  the  ends  of  the  same 
line  of  transaction. 

In  a  legal  sense,  export  begins  when  the  ship  with  its 
cargo  clears  from  the  home  port  for  the  lands  beyond  the  seas, 
or  when  the  goods  are  carried  across  an  international  boun- 
dary from  one  country  to  another.  Imports  only  become  such 
after  the  goods  from  abroad  are  in  the  custody  of  the  custom 
house  officers. 

In  an  economic  sense,  the  dividing  line  between  imports 
and  exports  is  the  clear  increment  earned  through  the  exchange 
of  commodities  after  all  the  transactions  have  been  balanced 
and  the  net  profit  from  the  trade  between  two  nations,  or  of 
one  nation  with  the  rest  of  the  world,  has  been  determined. 

It  is  not  an  easy  thing  to  determine  such  increment  with 
exactness  or  to  distinguish  between  imports  and  exports.  It 
is  impossible  to  obtain  exact  figures  covering  all  the  goods 
which  have  been  sent  out  of  the  country  or  to  bring  them 
under  proper  classification.  Nor  can  loss  always  be  determined 
from  figures  representing  the  volume  or  value  of  imports  or 
exports.  Gold  is  the  standard  of  value,  but  there  are  numerous 
cases  in  which  the  Individual  loss  or  gain  cannot  be  measured 
by  such  a  standard. 

It  is  not  possible  to  be  very  specific  on  this  point.  The 
topic  is  complex  and  puzzling.  The  purpose  here  is  rather 
to  warn  the  student  against  the  too  ready  assumption  of  the 
uncritical,  that  there  is  no  mystery  in  foreign  trade,  and  that 
the  entire  profit  in  such  trade  is  shown  in  the  excess  of  exports 
over  imports  according  to  the  values  represented  by  the  official 
figures. 

The  exporter  who  understands  his  problem  will  decide  to 
do  his  own  importing,   if  possible,    from  the  country  with 


IMPORTING  AND   THE   IMPORTER  105 

which  he  is  transacting  a  large  export  business.     He  will 
endeavor  to  influence  others  to  do  the  same.     Whenever  pos- 
sible he  will  make  his  investments  in  the  country  from  which 
he  expects  a  large  volume  of  trade. 
He  will  always  bear  in  mind: 

1.  That  imports  and  exports  are  equally  necessary  to  the 

welfare  of  a  nation. 

2.  That  international  trade  is  founded  on  reciprocity  and 

individual  and  national  welfare  in  world's  commerce 
can  be  maintained  only  on  a  broad  principle  of  give 
and  take. 

The  Importer  and  His  Staff 

The  business  and  functions  of  the  importer  are  well 
known,  and  it  is  hardly  necessary  to  describe  at  length  the 
factors  engaged  in  this  department  of  foreign  trade.  Those 
agencies  of  foreign  trade  that  are  for  the  most  part  exclusively 
concerned  with  importing  are  as  follows: 

The  importer  proper. 

The  importer  improperly  so-called. 

The  local  commission  houses. 

The  local  wholesale  distributer  or  jobber. 

The  importer  for  retail. 

The  export-importer. 

The  co-operative  importer. 

The  resident  buyer. 

The  importing  manufacturer. 

The  Importer  Proper 

The  importer  proper  Is  the  individual  or  company  that 
deals  on  a  national  scale  and  exclusively  with  merchandise 
imported  from  abroad.  Some  of  these  importers  conduct 
their  business  on  an  international  basis,  buying  goods  in  all 


I06  MACHINERY    OF   FOREIGN    TRADE 

the  principal  markets  of  the  world  and  reshipping  them  to 
other  countries  as  goods  exported  from  their  own  country. 
Great  Britain,  Germany,  and  Holland  have  many  such  im- 
porters. Their  buying  agents  are  constantly  engaged  in 
studying  the  markets,  investigating  the  products  of  the  differ- 
ent manufacturers  or  the  raw  material  of  the  producers  in 
all  parts  of  the  foreign  countries  in  which  they  operate. 

The  Importer  Improperly  So-Called 

The  importer  improperly  so-called  is  a  broker  commis- 
sioned by  one  or  more  small  distributers  to  purchase  goods 
for  them  in  foreign  markets.  He  owes  his  existence  to  the 
lack  of  knowledge  or  the  lack  of  facilities  of  those  who 
employ  him,  whose  purchases  are  generally  too  small  to  justify 
their  attention  to  the  numerous  formalities  which  only  an 
expert  can  understand.  The  importer  of  this  class  charges 
a  commission  varying  from  5  per  cent  upon  the  purchase 
price  to  as  much  as  he  can  get.  Frequently,  if  it  is  procurable, 
it  pays  to  get  a  list  of  these  "importers"  in  a  given  market 
and  to  cultivate  them  in  order  to  learn  the  local  conditions. 

Local  Commission  Houses 

The  local  commission  houses  are  the  main  channels  of 
distribution  for  imported  merchandise  in  the  countries  which 
have  few  if  any  wholesale  distributers  or  jobbers.  They  do 
business  on  a  strictly  commission  basis,  representing  numerous 
connections.  Sometimes  they  buy  and  sell  on  their  own 
account  as  well.  They  are  often  branches  of  houses  located 
in  the  countries  where  principal  purchases  are  made. 

In  deciding  as  to  what  extent  these  local  commission  houses 
may  be  useful  in  foreign  business  the  manufacturer  should 
not  neglect  to  inform  himself  relative  to  the  laws  of  their 
country  which  regulate  their  activities  and  define  their  rela- 
tionship with  the  outside  world. 


IMPORTING   AND   THE   IMPORTER  107 

Local  Wholesale  Distributer  or  Jobber 

Besides  traveling  salesmen  and  local  agents,  it  is  often 
desirable  for  an  exporter  to  establish  in  a  foreign  country  a 
connection  with  a  wholesale  representative  distributer  or  job- 
ber who  carries  a  line  of  samples,  or,  as  in  case  of  machinery, 
a  supply  of  spare  parts  for  repairs  and  who  will  oftentimes 
stock  goods.  Such  houses  are  not  always  easy  to  find,  but 
wherever  they  exist  they  form  a  convenient  link  between  the 
foreign  producer  and  the  local  consumer. 

Some  jobbers  specialize  in  one  or  more  kinds  of  merchan- 
dise, others  conduct  a  sort  of  wholesale  department  store, 
some  limit  their  activities  to  certain  territory,  while  others 
do  a  national  and  even  an  international  business.  They  differ 
from  the  importer  proper  merely  in  method  and  the  scope 
of  their  operations.  In  most  countries  they  take  the  place  of 
the  importer.  In  some  cases  they  accept  consignments  and 
sell  them  on  a  commission  basis.  They  are  popular  factors  in 
the  foreign  trade  of  Central  and  South  America, 

The  Importer  for  Retail 

The  importer  for  retail  is  usually  the  general  store 
operator  and  includes,  as  in  the  United  States  and  the  other 
large  countries,  the  department  store  representative  and  the 
buyers  for  the  retail  stores  specializing  in  imported  merchan- 
dise, milliners,  dressmakers,  tailors,  Japanese  art  goods  stores, 
etc.  These  people  can  be  reached  at  their  local  offices  and  will 
oftentimes  purchase  freely. 

The  Export-Importer 

The  export-importer  is  the  representative  of  the  manu- 
facturer in  charge  of  the  branch  house  or  distributing  office 
of  a  foreign  manufacturer  in  a  given  country.  He  is  both 
an  exporter  and  importer,  being  an  importer  in  a  legal  and 
local  sense  only. 


io8  MACHINERY   OF  FOREIGN   TRADE 

The  Co-operative  Importer 

The  co-operative  importer  may  represent  an  association  or 
governmental  agency.  Co-operative  buying  societies  exist  in 
several  countries,  Russia  and  England  for  example.  Some  of 
these  in  Russia  are  the  so-called  "Zemstvos."  Governments 
of  many  nations  have  always  been  extensive  buyers.  Their 
agents  are  often  governmental  officials  who  are  not  infre- 
quently represented  in  foreign  countries  by  permanent 
commissioners. 

The  Resident  Buyer 

In  recent  years  a  number  of  foreign  importing  houses  have 
begun  sending  their  buyers  into  this  country.  Some  of  these 
houses  established  offices  in  New  York  and  have  as  a  perma- 
nent representative  on  the  ground,  a  man  who  makes  all 
their  purchases  in  this  country.  These  representatives  are 
called  in  the  trade  "resident  buyers"  of  the  concerns  employing 
them,  and  they  call  themselves  the  "American  representatives" 
of  their  employers.  Some  American  firms  have  also  their 
resident  buyers  stationed  abroad. 

The  Importing  Manufacturer 

The  importing  manufacturer  buys  goods  in  foreign 
countries,  usually  raw  materials,  for  use  in  his  manufacturing 
business. 

Custom  House  Broker 

The  custom  house  broker  is  a  person  authorized  to  act 
for  purchasers  in  the  import  and  export  of  goods,  and  in  the 
transactions  of  the  general  business  pertaining  to  shipping. 
His  legal  status  is  similar  to  that  of  a  mercantile  agent  who 
is  employed  to  buy  or  sell  goods  for  other  people.  Being  an 
agent,  he  must  act  strictly  within  the  scope  of  his  authority 
lest  he  lose  all  rights  to  remuneration  or  brokerage.     Abroad, 


IMPORTING   AND    THE    IMPORTER  109 

brokers  are  usually  licensed  by  the  government,  occupying  a 
position  similar  to  that  of  notaries  in  the  United  States,  and 
they  are  frequently  required  to  put  up  a  large  bond  for  the 
faithful  performance  of  their  duties. 

Warehouse 

The  warehouse  plays  a  very  important  role  in  importing,  as 
imported  goods  may  remain  in  a  bonded  warehouse  for 
years  without  payment  of  duty.  Frequently  the  warehouse  is 
useful  for  the  exporter,  especially  in  making  a  shipment  of 
merchandise  on  which  there  is  an  excise  tax,  as  in  case  of 
liquors  and  tobacco. 

Drawback  Broker  or  Specialist 

The  drawback  broker  concerns  himself  with  the  collection 
from  the  government  of  the  benefit  of  drawback,  which  is 
repayment  to  the  exporter  of  the  99  per  cent  of  the  duty  paid 
on  the  imported  material  from  which  the  exported  article  is 
made.     He  usually  works  on  a  commission  basis. 

Methods  of  Importation 

The  American  methods  of  purchasing  goods  abroad  are 
either  through  correspondence,  or  through  the  importers  who 
make  periodical  purchasing  trips  abroad  or  send  their  repre- 
sentatives. Whenever  convenient,  however,  purchases  are 
made  through  the  local  representatives  of  foreign  concerns 
stationed  in  America  and  sometimes  through  their  own  perma- 
nent buyer  located  abroad. 

Other  countries  employ  similar  methods,  but  in  addition 
they  do  a  tremendous  business  through  commission  houses, 
through  the  importers,  properly  so-called,  and  through  brokers. 

Every  exporting  producer  should  thoroughly  familiarize 
himself  with  the  methods  by  which  the  importing  business  is 
conducted  in  the  country  of  his  interests.     He  should  then 


no  AIACHINERY    OF   FOREIGN    TRADE 

learn  the  channels  through  which  the  imports  are  carried 
in  a  given  country  so  as  to  be  able  to  investigate  all  the 
avenues  of  trade  and  determine  beforehand  the  nature,  quality, 
and  extent  of  both  the  supply  and  the  demand.  This  informa- 
tion is  needed  for  the  preparation  of  his  plans,  and  for  the 
study  of  the  market  conditions  no  less  than  for  conducting  his 
selling  campaigns. 

There  are  various  directories  of  foreign  buyers  and  trade 
information  on  file  with  trade  associations  and  in  the  United 
States  Bureau  of  Foreign  and  Domestic  Commerce.  But  the 
most  certain  way  to  ascertain  the  exact  importing  machinery  in 
a  given  country  is  to  send  a  properly  qualified  representative  to 
study  and  report. 


CHAPTER    XIV 

CHIEF  FACTORS  IN  THE  MACHINERY 

Sources  of  Information 

The  study  of  the  machinery  of  foreign  trade  is  completed 
by  a  consideration  of  the  sources  of  information  upon  which 
the  exporter  can  draw  and  by  a  brief  discussion  of  the  in- 
dispensable factors  of  this  machinery.  The  full  discussion  of 
the  more  important  of  these  factors  has  been  reserved  for 
following  chapters. 

Most  important  of  all  sources  of  information  are  the  gov- 
ernment bureaus,  the  consulates  of  foreign  countries  in  the 
United  States,  and  the  United  States  consulates  abroad.  In- 
formation of  a  general  character  which  is  in  the  interest  of 
trade  between  two  countries  is  given  to  the  best  of  the  ability 
of  the  staffs  of  these  offices.  Specific  information  requiring 
investigation  must  of  course  be  sought  for  by  the  exporter  or 
his  agent.  The  following  chapter  contains  a  description  of 
the  governmental  trade  machinery.  A  list  of  the  foreign  cities 
in  which  United  States  consuls  are  stationed  is  given  in 
Appendix  B. 

Foreign  Trade  Publications 

The  trade  papers  in  this  country  which  maintain  foreign 
trade  departments  and  the  export  journals  are  generally  willing 
and  able  to  answer  any  question  relating  to  the  mechanism  of 
foreign  trade.  The  foreign  departments  of  the  trade  associa- 
tions which  are  seeking  by  co-operative  effort  to  create  a  mar- 
ket for  their  goods  abroad  are  usually  able  to  supply  any  infor- 
mation relating  to  their  particular  trade. 

Ill 


112  MACHINERY    OF   FOREIGN    TRADE 

Insurance  and  Freight  Rates 

The  marine  insurance  poHcy  is  an  indispensable  factor  of 
nearly  every  transaction  of  the  exporter.  This  complicated 
detail  of  insurance  is  discussed  in  Chapter  XXX VI. 

Ocean  carriers  include  both  freighters  and  passenger-  ves- 
sels and  the  lighters  or  other  small  vessels  carrying  freight 
from  a  public  pier  to  a  vessel  stationed  in  the  port.  The  rates 
for  freight  between  any  two  ports,  including  lighterage,  the 
rates  of  insurance,  and  all  other  questions  concerning  the  cost 
of  making  foreign  shipments  will  be  furnished  by  any  ship- 
ping house  which  has  relations  with  the  country  to  which  the 
shipment  is  to  be  forwarded. 

Parcel  Post  and  Express 

The  limit  of  weight  which  can  be  sent  abroad  by  means  of 
the  parcel  post  is  20  lbs.  The  huge  mail  order  houses  in  this 
country  handle  all  the  foreign  business  that  comes  within  this 
weight  limit  by  mail.  Samples  and  catalogues,  which  in  most 
countries  are  admitted  without  duty,  are  invariably  handled 
by  this  means  and  small  consignments  may  usually  be  sent  by 
parcel  post  with  greater  safety  than  by  any  other  method  of 
transportation.  A  list  of  the  parcel  post  countries  will  be 
found  in  Appendix  B. 

The  express  companies  of  this  country  are  equipped  with 
the  machinery  to  forward  package  freight  of  any  kind  to  any 
port  in  the  world  served  by  a  regular  line  of  steamships.  The 
American  Express  Company  maintains  offices  in  London  and 
Paris  and  is  prepared  to  render  the  combined  services  of  col- 
lection and  shipping  agents  to  the  more  important  of  cities  of 
Europe. 

Banks  and  Collections 

The  international  bank  or  the  local  bank  with  a  foreign 
department  and  international  connections  is  prepared  to  take 


CHIEF   FACTORS   IN   THE   MACHINERY  113 

over  the  burden  of  financing  export  trade  by  advancing  the 
greater  part  of  the  vakie  of  an  invoice  against  the  documents 
which  give  title  to  the  goods.  The  bank  through  its  affiHations 
will  also  collect  the  amount  due  by  means  of  a  draft  to  be 
presented  to  the  buyer  on  the  arrival  of  the  goods  and  payable 
either  at  sight  or  at  some  future  date.  The  methods  of  financ- 
ing foreign  shipments  are  described  in  Chapter  XXXVII. 

The  bank  of  course  does  not  press  claims  against  a  debtor 
who  fails  to  accept  his  draft  or  take  it  up  when  due.  Collec- 
tion agencies  exist  abroad  as  well  as  at  home  and  connections 
may  be  made  with  them.  Many  collection  agencies  in  the 
United  States  will  undertake  to  press  claims  against  delin- 
quent debtors  abroad. 

Forwarding  Agents 

The  function  of  the  forwarding  agent  is  to  be  of  service 
to  shippers,  especially  in  interior  points.  Better  rates  may  be 
obtained  through  them,  because  forwarding  agents  are  sup- 
posed to  ship  goods  in  large  lots.  Usually  they  combine  the 
function  of  freight  forwarders  with  the  performance  of  other 
services  which  the  shipper  may  need  in  making  his  consign- 
ments, especially  if  he  has  no  agent  of  his  own  at  the  port  of 
shipment.  For  instance,  forwarding  agents  in  most  cases 
attend  to  the  transfer  of  merchandise  from  the  station  to  the 
dock,  see  the  shipment  onto  the  boat,  attend  to  the  bill  of 
lading,  insurance  policy,  consular  formalities,  and  even  to  the 
sale  of  the  shippers'  drafts.  Thus  this  factor  usually  combines 
the  functions  of  freight  broker  with  those  of  custom  house 
broker  and  agent  so  far  as  it  is  necessary  to  make  the  ship- 
ment and  to  collect  the  payment  for  it. 

By  special  arrangements,  some  such  agents  will  undertake 
even  to  sell  small  consignments  abroad,  which  may  serve  the 
purpose  of  trial  orders.  They  will  distribute  samples  and 
sometimes  they  solicit  orders.    Some  of  the  companies  engaged 


IT4 


MACHINERY   OF   FOREIGN   TRADE 


in  the  forwarding  business  advertise  parcel  express  service, 
which  is  performed  by  express  companies  and  the  United 
States  Post  Office.  There  are  instances  when  such  service 
may  be  most  useful  and  the  facilities  afforded  by  these  factors 
deserve  investigation.  They  serve  both  importers  and  ex- 
porters. A  list  of  reliable  houses  can  be  obtained  from  the 
United  States  Department  of  Commerce. 

Foreign  Exchange  Broker 

The  foreign  exchange  broker  is  found  in  port  cities  and 
makes  his  living  by  negotiating  foreign  drafts  with  banking 
houses.  He  does  not  usually  handle  any  money  himself.  He 
learns  from  different  bankers  the  prices  they  are  willing  to 
pay  for  certain  drafts  and  reports  these  offers  to  his  principal 
who  chooses  the  best  offer  and  collects  his  money  himself.  The 
broker  receives  a  commission  for  his  information.  Foreign 
exchange  brokers  do  other  kinds  of  brokerage  at  the  same 
time.  They  are  found  only  in  large  seaport  cities  like  New- 
York. 

The  Investigator 

Of  recent  years  a  link  has  been  developed  in  the  foreign 
trade  machinery,  called  the  "investigator."  The  first  investi- 
gators were  special  agents  sent  abroad  by  the  government  to 
study  trade  conditions.  The  private  investigator  is  now  a 
familiar  figure.  He  is  usually  a  specialist  in  the  line  he  is 
commissioned  to  investigate.  He  is  the  business  diplomat  and 
the  commercial  scout  of  trade  strategy,  and  should  be  a  man 
who  has  had  a  successful  experience  at  home  in  the  business 
he  is  commissioned  to  investigate  abroad. 

Foreign  Trade  Specialists 

The  export  adviser  is  a  new  figure  in  the  field  of  foreign 
trade.     There  are  at  present  very  few  of  these  foreign  trade 


CHIEF   FACTORS   IN   THE   MACHINERY  115 

Specialists  who  are  fully  competent  to  give  advice  on  every 
phase  of  the  work.  Here  and  there  a  former  official  of  the 
United  States  Department  of  State  or  of  Commerce  specializes 
in  this  line  of  endeavor,  but  as  yet  the  demand  for  his  services 
is  limited.  It  is  not  that  the  specialist  of  this  character  is  not 
needed,  but  that  the  business  men  of  this  country  have  not  yet 
come  to  realize  how  valuable  to  them  a  fully  competent  trade 
adviser  can  be.  It  is  only  a  question  of  time  when  the  foreign 
trade  efficiency  engineer — by  whatever  name  he  may  be  called 
— will  have  a  permanent  place  on  the  staff  of  every  extensive 
exporter.  The  manufacturers  who  do  not  know  where  they 
stand  in  reference  to  their  foreign  trade,  whose  so-called 
export  managers  are  inexperienced,  who  do  not  yet  know  the 
fundamental  principles  of  foreign  trade — much  less  how  to 
break  into  a  foreign  market — certainly  need  an  expert  adviser 
for  whom  they  should  be  prepared  to  pay  liberally. 

Every  co-operative  trade  organization  should  retain  a 
competent  foreign  trade  adviser  who  is  constantly  available 
for  advice  and  council. 


CHAPTER   XV 

THE    FOREIGN    TRADE    MACHINERY    OF    THE 
UNITED  STATES  GOVERNMENT 

The  Governmental  Machinery 

If  the  foreign  trade  machinery  of  the  United  States  gov- 
ernment is  intelHgently  utiHzed,  it  can  be  of  the  greatest  value 
to  the  man  engaged  in  international  commerce.  But  he  must 
know  what  it  is  and  how  it  works  if  he  is  to  use  it  to  the  best 
advantage. 

Most  of  our  government  machinery  designed  to  aid  foreign 
trade  is  operated  under  the  supervision  of  the  State  Depart- 
ment and  of  the  Department  of  Commerce.  This  work  is 
carried  on  through  the  bureaus  of  those  departments  and 
through  our  diplomatic,  consular,  and  commercial  agents 
throughout  the  world.  The  work  of  the  Tariff  Commission 
has  a  most  vital  bearing  on  foreign  trade  and  recently  the 
Shipping  Board  and  the  Federal  Trade  Commission  have  be- 
come important  factors. 

Machinery  of  the  State  Department 

The  State  Department  is  the  legal  organ  of  communication 
between  this  government  and  those  of  foreign  nations.  It 
negotiates  treaties  and  other  international  agreements,  prose- 
cutes the  claims  of  our  citizens  against  foreign  governments, 
and  protects  their  rights  through  its  diplomatic  channels  and 
by  such  other  means  as  are  at  its  disposal. 

In  presenting  claims  against  foreign  governments,  the 
claimant  must  conform  to  a  prescribed  procedure.  He  must 
file  a  sworn  petition  or  memorial,  setting  forth  the  facts  and 

ii6 


UNITED    STATES    GOVERNMENT    MACHINERY         117 

circumstances  from  which  his  right  to  prefer  the  claim  is  de- 
rived. This  petition  is  accompanied  by  the  evidence  in  support 
of  the  claim,  with  the  proof  that  the  claimant  is  and  was  at  the 
time  the  claim  originated  a  citizen  of  the  United  States.  If 
the  Department  is  satisfied  that  the  claimant  has  made  out  a 
prima  facie  case,  it  will  press  the  claim  against  the  government 
in  question. 

The  claims  of  American  citizens  against  foreign  govern- 
ments are  of  great  variety,  but  the  most  common  claims  are 
those  based  either  on  wrongful  arrest  and  imprisonment  or  on 
the  denial  of  justice.  An  important  rule  to  bear  in  mind  in 
connection  with  claims  based  upon  the  denial  of  justice  is  that 
the  claimant  must  have  exhausted  all  other  remedies  before 
appealing  to  the  State  Department.  If  the  laws  of  the  country 
provide  a  means  of  redress  through  an  appeal  to  higher  courts 
of  justice,  the  Department  will  not  interfere.  Neither  will  it 
consider  claims  against  private  individuals.  The  claims  must 
be  against  the  foreign  government  or  its  representatives,  since 
individuals  can  be  prosecuted  through  the  courts  of  the  country 
in  which  the  cause  of  action  accrues. 

The  Secretary  of  State  passes  upon  the  claims  of  aliens 
presented  by  their  governments  against  the  government  of  the 
United  States.  Such  an  alien  to  obtain  consideration  must 
first  appeal  directly  to  the  foreign  affairs  department  of  his 
country.  His  embassy  in  this  country  is  powerless  to  take  the 
initiative  in  such  matters. 

For  instance,  a  cargo  of  petroleum  consigned  to  a  citizen 
in  the  United  States  was  held  at  Riga  by  the  revenue  officers  of 
that  port  on  the  ground  that  the  consignee  had  not  furnished  a 
guarantee  required  by  law  that  the  goods,  after  reaching  the 
United  States,  would  not  be  reshipped  to  the  enemies  of  Russia. 
When  the  purchaser  in  the  United  States  was  informed  of  the 
action  he  went  to  the  Russian  Ambassador  in  Washington  and 
offered  to  adjust  matters.    Here  he  was  referred  to  his  Depart- 


Ii8  MACHINERY    OF   FOREIGN    TRADE 

ment  of  State  on  the  grounds  that  the  embassy  could  not 
negotiate  such  matters  directly.  Our  State  Department  took 
up  the  matter  with  the  Russian  Department  of  Foreign  Affairs 
through  which  it  was  finally  adjusted. 

There  is  absolutely  no  exception  to  the  rule  that  the  only 
channel  in  this  country  through  which  a  citizen  of  the  United 
States  can  secure  redress  against  another  country  is  the  De- 
partment of  State. 

The  Diplomatic  Service 

The  State  Department  controls  the  diplomatic  and  consular 
service  of  the  country,  located  at  more  than  three  hundred 
different  posts  throughout  the  world.  The  diplomatic  ofBcers 
are  the  accredited  representatives  or  agents  of  the  government 
through  whom  contact  wdth  foreign  governments  is  main- 
tained. 

The  diplomatic  service  of  the  United  States  is  divided  into 
four  ranks:  (i)  ambassadors,  (2)  envoys  extraordinary  and 
ministers  plenipotentiary,  (3)  ministers  resident,  and  (4) 
charges  d'affaires,  which  latter  are  active  only  in  the  absence 
of  the  ambassador  or  minister,  taking  his  place  as  an  acting 
ambassador  or  minister. 

A  diplomatic  officer  is  required  to  transmit  to  his  govern- 
ment at  frequent  intervals  accurate  information  concerning  the 
policy  and  views  of  the  government  to  w'hich  he  is  accredited, 
with  detailed  reports  on  political  events  and  similar  matters 
which  may  have  a  bearing  upon  international  relations.  The 
communications  of  the  diplomatic  officers  abroad  to  the  State 
Department  are  called  "dispatches."  In  recent  years  our  diplo- 
matic representatives  have  been  required  to  keep  a  keen  eye  on 
all  measures  relating  to  commerce  which  may  affect  the  inter- 
ests of  our  manufacturers  and  exporters.  American  diplomats 
are  not  communicated  with  directly  by  private  American  citi- 
zens, but  should  always  be  addressed  through  the  Department 


UNITED    STATES    GOVERNMENT    MACHINERY         119 

of  State.     A  list  of  the  embassies  and  legations  which  the 
United  States  maintains  abroad  is  given  in  Appendix  B. 

The  Consular  Service 

While  the  consuls  and  consular  officers  are  also  under 
control  of  the  State  Department  their  duties  are  restricted  to 
commercial  matters  and  their  reports  go  to  the  Department 
of  Commerce.  They  have  no  diplomatic  functions  and 
their  work  in  no  way  conflicts  with  that  of  the  diplomatic 
corps.  Consuls  are  the  commercial  or  business  agents  of  the 
country.  Their  functions  and  duties  are  to  facilitate  trade, 
furnish  valuable  information  on  matters  of  interest  to  com- 
mercial concerns  of  the  country,  watch  over  the  shipping  and 
navigation  of  their  own  country,  and  endeavor  to  prevent 
fraud  upon  its  revenues  and  to  protect  the  persons  and  interests 
of  their  countrymen  abroad. 

One  of  the  important  duties  of  consuls  is  that  of  certifying 
to  the  correctness  of  declarations  required  by  law  to  accompany 
invoices  of  merchandise  exported  to  the  United  States.  In 
this  connection  the  consul  is  required  to  receive  the  declaration 
of  the  shipper  as  to  the  actual  value  of  the  goods  shipped  from 
his  district  into  the  United  States  and  to  certify  the  invoices  of 
goods  exceeding  $100  in  value  destined  for  entry  into  the 
United  States. 

Of  particular  interest  to  exporters  are  the  consular  reports 
of  trade  opportunities  occurring  in  different  parts  of  the  world. 
These  reports  are  published  by  the  Department  of  Commerce 
in  its  Daily  Commerce  Reports. 

Another  effective  way  in  which  the  consuls  aim  to  assist 
our  foreign  trade  is  in  the  maintenance  of  commercial  reading 
rooms  and  information  bureaus  at  the  consular  offices  in  all 
parts  of  the  world  where  catalogues  of  American  manufactur- 
ers, trade  papers,  classified  indexes,  price  lists,  discount  sheets, 
and  other  matters  of  trade  importance  are  available. 


I20  MACHINERY    OF   FOREIGN    TRADE 

Unlike  the  diplomatic  officers,  the  consular  officers  can  be 
directly  communicated  with  by  anyone  who  has  business  with 
them.  They  are  useful  sources  of  specific  information,  relating 
to   foreign  trade.     The  consuls  should  not  be  addressed  by 

name,  but  as  "The  American  Consulate  General  at ," 

for  the  reason  that  when  the  consul  is  away,  his  official  cor- 
respondence is  opened  at  the  office  in  his  absence  and  attended 
to  by  his  assistants.  A  list  of  the  foreign  cities  in  which  Amer- 
ican consulates  are  located  is  given  in  Appendix  B. 

The  Office  of  Foreign  Trade  Advisers 

An  important  bureau  attached  to  the  Department  of  State 
is  that  of  the  Office  of  Foreign  Trade  Advisers.  The  re- 
sources and  activities  of  this  bureau  are  described  in  a  state- 
ment w^iich  will  be  found  in  Appendix  A.  The  duties  of  the 
bureau  mav  be  summarized  as  follows: 

1.  To  control  and  direct  the  commercial  work  of  the 

diplomatic  and  consular  services. 

2.  To  attend  to  the  correspondence   and  other  miscel- 

laneous business  of  the  State  Department  which  re- 
lates primarily  to  trade. 

3.  To  gather  information  and  formulate  advice  on  com- 

mercial subjects  for  the  use  of  the  Secretary  and 
other  officers  of  the  Department. 

Machinery  of  the  Department  of  Commerce 

In  addition  to  the  work  of  the  Office  of  Foreign  Trade 
Advisers,  a  great  deal  of  work  that  is  extremely  valuable  to 
everybody  engaged  in  foreign  trade  is  done  by  the  Depart- 
ment of  Commerce.  This  work  includes  the  preparation  of  in- 
formation secured  through  the  consular  service.  It  covers 
every  possible  feature  of  trade  in  other  countries  that  could  be 
of  interest  to  business  men  seeking  markets  in  foreign  coun- 
tries.   Its  publications  are  available  to  all  who  ask  for  them. 


UNITED    STATES    GOVERNMENT    MACHINERY         121 

There  is  a  bureau  in  the  Department  of  Commerce,  known 
as  the  Bureau  of  Foreign  and  Domestic  Commerce,  which  is 
of  special  interest  to  foreign  traders.  The  following  descrip- 
tion of  its  work  has  been  furnished  by  its  chief: 

The  Bureau  of  Foreign  and  Domestic  Commerce  is  charged  by 
law  with  the  duty  of  "developing  the  various  manufacturing  indus- 
tries of  the  United  States  and  markets  for  their  products  at  home 
and  abroad,  by  gathering  and  publishing  useful  information,  or  by 
any  other  available  method." 

The  Bureau  is  a  clearing  house  for  commercial  information  of 
all  kinds,  and  has  a  well-organized  and  efficient  system  for  its 
collection  and  distribution. 

It  furnishes  American  manufacturers  and  exporters  with  definite 
information  as  to  specific  opportunities  to  sell  their  goods  in  foreign 
countries.  It  edits  and  publishes  consular  reports  on  commercial 
subjects. 

It  tabulates  and  publishes  statistics  of  American  trade  with 
foreign  countries.  It  collects,  translates,  and  publishes  customs 
tariffs  of  foreign  countries. 

It  formulates  instructions  for  the  commercial  work  of  the  con- 
sular service.  It  has  a  corps  of  commercial  agents  who  visit  foreign 
countries  and  make  reports  upon  special  industries  and  special  phases 
of  commerce.  It  maintains  a  staff  of  commercial  attaches  stationed 
in  the  principal  countries  of  the  world,  who  devote  all  their  time  to 
commercial  studies.  Through  its  distant  offices  it  disseminates  trade 
information  and  keeps  in  touch  with  the  commercial  interests  of 
the  country. 

The  official  statement  which  appears  in  Appendix  A  de- 
scribes in  further  detail  the  work  of  the  bureau. 

Other  Governmental  Factors 

The  following  governmental  boards  constitute  a  part,  at 
present,  of  the  machinery  concerned  with  the  promotion  and 
control  of  foreign  trade: 

1.  The  Shipping  Board 

2.  The  Federal  Trade  Commission 

3.  The  Tariff  Commission 


122  MACHINERY   OF   FOREIGN   TRADE 

The  Shipping  Board 

The  Shipping  Board  has  two  functions.  It  has  control  of 
the  construction  of  the  emergency  fleet  and  at  the  same  time 
regulates  foreign  commerce,  performing,  in  connection  with 
foreign  trade,  the  work  of  the  Interstate  Commerce  Commis- 
sion in  the  domestic  field. 

The  Federal  Trade  Commission 

The  Federal  Trade  Commission  in  its  general  place  and 
purpose  has  a  large  indirect  bearing  upon  our  foreign  trade. 
The  last  paragraph  of  Section  6  of  the  act  creating  the  Federal 
Trade  Commission  has  a  direct  bearing  on  the  subject.  This 
paragraph  is  as  follows:  The  Commission  shall  have  power 
"to  investigate  from  time  to  time  trade  conditions  in  and  with 
foreign  countries  where  associations,  combinations  or  practices 
of  manufacturers,  merchants  or  traders,  or  other  conditions, 
may  affect  the  foreign  trade  of  the  United  States,  and  to  report 
to  Congress  thereon,  with  such  recommendations  as  it  deems 
advisable." 

This  provision  empowers  the  Commission  to  investigate 
in  cases  where  foreign  combinations  affect  American  business. 
Tariff  matters  and  the  entire  system  under  which  corporate 
business  is  conducted  in  foreign  countries  may  be  investigated. 
If  the  Commission  finds  that  corporations  in  foreign  countries 
possess  advantages,  and  under  the  laws  of  their  countries  are 
allowed  latitude  and  privileges  which  make  it  difficult  or 
impossible  for  American  corporations  to  compete  successfully 
with  them,  it  may  report  its  conclusions  to  Congress,  with  its 
recommendations  for  additional  legislation. 

It  is  entirely  possible,  therefore,  for  the  Trade  Commission 
to  become  a  great  safeguard  of  our  business  interests  abroad 
and  our  American  foreign  trade  ought  to  be  greatly  aided  by 
these  powers,  if  they  are  exercised  with  sagacity. 

In  pursuance  of  the  duty  thus  conferred  by  Congress,  the 


UNITED   STATES   GOVERNMENT   MACHINERY         123 

Commission  has  busied  itself  upon  the  matter  of  foreign  trade 
very  effectively.  Conferences  were  held  at  which  manufac- 
turers and  exporters  were  invited  to  give  their  opinions  prin- 
cipally regarding  the  desirability  or  the  non-desirability  of 
extending  the  application  of  the  Sherman  Anti-Trust  Law,  and 
other  acts  in  connection  therewith,  to  our  foreign  trade.  The 
Commission  also  addressed  numerous  letters  of  inquiry  to 
those  who  they  thought  could  speak  upon  the  subject,  if  not 
authoritatively,  at  least  wisely.  The  result  was  the  enactment 
of  the  Webb-Pomerene  Law. 

The  future  of  the  Commission,  as  well  as  the  value  of  the 
work,  will  depend  entirely  upon  the  efficiency  of  its  personnel 
and  the  financial  help  which  Congress  provides  for  its  activi- 
ties. Certainly  its  powers,  for  weal  or  for  woe,  are  most 
astonishing  if  it  should  have  the  capacity  to  appreciate  them 
and  the  initiative  to  exercise  them.  The  rules  of  procedure 
of  the  Commission  are  given  in  Appendix  A. 

United  States  Tariff  Commission 

The  Tariff  Commission  has  authority  to  investigate  the 
operation  and  effects  of  the  custom  laws.  This  information  it 
is  directed  to  put  at  the  disposal  of  Congress  and  the  President. 
It  has  the  power  "to  investigate  the  tariff  relations  of  the 
United  States  and  foreign  countries,  commercial  treaties,  pref- 
erential provisions,  economic  alliances,  the  effect  of  export 
bounties  and  preferential  transportation  rates,  the  volume  of 
importations  compared  with  domestic  production  and  con- 
sumption and  the  conditions,  causes  and  effects  of  the  compe- 
tition of  foreign  industries  with  those  of  the  United  States 
including  dumping  and  the  cost  of  production." 

Co-ordinating  Committee  on  Foreign  Trade 

The  recently  organized  Co-ordinating  Committee  on  For- 
eign Trade  marks  a  distinctly  constructive  step  in  the  promo- 


124  MACHINERY   OF  F^PEIGN   TRADE 

tion  of  export  commerce.  This  new  governmental  agency 
"includes  representatives  of  all  Governmental  offices  which 
deal  in  any  way  in  foreign  trade  matters.  Its  duty  is  to  formu- 
late conclusions  and  to  harmonize  and  co-ordinate  all  Govern- 
mental activities  in  any  way  connected  with  foreign  trade, 
thus  safeguarding  the  economic  future  of  the  nation. 

"The  committee  will  provide  advisory  and  supervisory 
machinery  of  Government  executives  for  unifying  the  work  of 
further  extending  and  developing  the  business  interests  of  the 
United  States  in  foreign  channels. 

"Neither  the  committee  as  a  whole,  nor  its  subcommittees, 
will  deal  with  specific  cases  of  foreign  trade  interests  except 
as  they  may  be  brought  to  its  attention  by  the  different  Gov- 
ernment officers  now  handling  these  matters." 

The  work  of  this  committee  should  be  a  large  factor  in 
rendering  more  efficient  and  helpful  the  foreign  trade  machin- 
ery of  this  country.  Through  it  the  results  of  many  years  of 
governmental  research  work  will  be  placed  at  the  disposal  of 
American  merchants  in  their  efforts  to  build  up  a  stable  and 
permanent  trade  expansion  policy  for  the  United  States. 

Federal  Reserve  Bank 

Somewhat  distinct  from  the  commonly  recognized  foreign 
trade  machinery  of  the  government  is  the  federal  reserve  bank, 
yet  it  too  plays  its  part  in  our  national  scheme  of  foreign  trade 
promotion. 

Under  our  old  national  banking  system  which  was  inaugu- 
rated at  the  end  of  the  Civil  War,  the  national  bank  note 
currency  was  based  upon  government  bonds  which  were  de- 
posited in  the  treasury,  and  the  currency  issued  has  been 
classed  as  bond-secured  currency.  This  method  not  only  na- 
tionalized and  unified  our  currency  but  it  also  created  a  market 
for  United  States  bonds,  in  that  way  sustaining  their  value. 
Notes  were  issued  by  both  state  banks  and  national  banks. 


UNITED    STATES    GOVERNMENT    MACHINERY         125 

For  a  time  the  system  worked  very  well,  but  it  outlived  its 
usefulness.  Then  currency  began  to  show  a  lack  of  elasticity 
and  whenever  there  was  any  cause  for  a  panic  our  whole 
financial  system  was  threatened  with  upheaval. 

Statesmen  and  bankers,  realizing  the  deficiency  and  weak- 
ness of  our  national  banking  system,  inaugurated  a  movement 
for  reform  which  finally  resulted  in  an  enactment  by  Congress 
in  the  year  1913,  of  the  Federal  Reserve  Bank  Act  under 
which  federal  reserve  banks  were  established  in  twelve  cities 
of  the  United  States,  namely:  Boston,  New  York,  Philadel- 
phia, Cleveland,  Richmond,  Atlanta,  Chicago,  St.  Louis,  Kan- 
sas City,  St.  Paul,  Dallas,  and  San  Francisco.  These  twelve 
cities  are  known  as  federal  reserve  cities,  each  being  the  head- 
quarters for  the  district  in  which  it  is  located. 

Each  district  comprises  all  the  national  banks  therein  which 
were  required  to  become  stockholders  in  the  federal  reserve 
bank  of  the  district ;  state  banks  and  trust  companies  which 
complied  with  certain  requirements  were  also  permitted  to  be- 
come stockholders.  At  the  present  time  there  are  approxi- 
mately seventy-five  hundred  national  banks  in  the  United 
States  which  have  been  compelled  to  become  members  of  the 
federal  reserve  system. 

Each  national  bank  is  required  to  subscribe  to  stock  of  the 
federal  reserve  bank  of  its  district  to  an  amount  equal  to  6 
p:r  cent  of  its  paid-up  capital  stock  and  surplus.  Federal 
reserve  banks  do  no  business  with  the  public  directly.  A  fed- 
eral reserve  bank  is  rather  a  bank  for  banks.  It  is  a  depository 
for  a  certain  portion  of  the  reserve  of  all  the  member  banks, 
in  addition  to  which  it  may  also  be  a  depository  for  govern- 
ment funds. 

Functions  and  Operation  of  the  Federal  Reserve  Bank 

One  function  of  the  bank  is  to  issue  and  redeem  currency. 
It  may  secure  from  the  Treasury  government  notes,  known 


126  MACHINERY   OF  FOREIGN   TRADE 

as  federal  reserve  notes,  which  it  may  issue  against  commer- 
cial paper  with  a  minimum  gold  reserve  of  20  per  cent.  Fed- 
eral reserve  banks  are  also  granted  certain  powers  in  the  matter 
of  operations  in  the  open  market,  such  as  the  purchase  of 
commercial  paper,  foreign  exchange,  etc.  Thus  they  function 
as  clearing  houses  for  their  members. 

Each  federal  reserve  bank  is  governed  by  nine  directors. 
Three  of  these  represent  the  member  banks  and  three  represent 
commercial,  agricultural,  or  other  pursuits;  these  six  directors 
are  chosen  by  the  member  banks.  The  remaining  three  are 
appointed  by  the  government,  or  rather  by  the  Federal  Reserve 
Board.  The  directors  are  charged  with  the  duty  of  appointing 
all  the  officers  including  the  manager  of  the  bank,  who  is 
designated  as  "Governor." 

The  entire  system  is  under  the  supervision  of  the  central 
board  in  Washington.  This  board,  known  as  the  Federal 
Reserve  Board,  consists  of  the  Secretary  of  the  Treasury,  the 
Comptroller  of  the  Currency  acting  ex-officio,  and  five  other 
members,  named  by  the  President  with  the  approval  of  the 
Senate,  who  receive  a  salary  of  $12,000  per  annum.  The 
amounts  constituting  the  salaries  of  the  directors,  together 
with  the  other  expenses,  are  assessed  against  the  federal 
reserve  banks  in  proportion  to  their  capital  stock  and  surplus. 

The  most  important  bearing  of  the  Federal  Reserve  Act  on 
foreign  trade  is  that  part  of  it  which  pertains  to  the  permission 
to  national  banks  with  a  certain  surplus  and  capitalization  to 
open  foreign  branches.  Under  this  act  all  banks  in  the  federal 
reserve  system  are  authorized  to  accept  drafts  or  bills  of  ex- 
change drawn  on  them  in  foreign  trade  transactions.  They 
are  also  allowed  to  rediscount,  with  federal  reserve  banks,  the 
acceptances  based  on  the  importation  or  the  exportation  of 
merchandise.  (For  text  of  this  portion  of  the  act  see  Appen- 
dix A.) 

These  features  of  the  law  have  been  most  beneficient  to 


UNITED    STATES    GOVERNMENT    MACHINERY  127 

foreign  traders  allowing  tiiem  to  meet  the  competition  of  other 
nations  more  effectively.  By  this  means  a  ready  discount  mar- 
ket has  been  created  and  facilities  for  extension  of  credit  mul- 
tiplied in  favor  of  the  American  trader. 


CHAPTER   XVI 

FOREIGN  TRADE  ORGANIZATIONS  IN  THE 
UNITED  STATES 

Public  Organizations 

The  public  organizations  in  the  United  States  concerned 
with  the  promotion  of  foreign  trade  may  be  divided  into  three 
classes  according  to  the  scope  of  their  activities: 

1.  National  organizations 

2.  Local  organizations 

3.  International  organizations 

National  Organizations 

The  organizations  which  may  be  considered  as  national  in 

their  scope  and  purpose  include  the  following,  the  first  three 

of  which  devote  themselves  exclusively  to  the  promotion  of 

foreign  trade: 

The  National  Foreign  Trade  Council,  New  York  City. 
The  American  Manufacturers  Export  Association,  New  York 

City. 
The  American  Exporters  and  Importers  Association,   New 

York  City. 
The  Philadelphia  Commercial  Museum,  Philadelphia,  Pa. 

The  purpose  of  the  National  Foreign  Trade  Council  as 
stated  in  its  literature  is  "effectively  to  co-operate  with  other 
organizations  in  the  encouragement  of  sound  national  foreign 
trade  policy."  Its  function  is  investigative  and  advisory. 
The  reports  of  its  annual  conventions  are  perhaps  the  most 
interesting  and  suggestive  material  of  this  character  that  is  at 
present  available.     To  the  work  of  this  council  and  its  un- 

128 


ORGANIZATIONS    IN    THE   UNITED    STATES  129 

usually  able  membership  and  officers  is  due  much  of  the  credit 
for  the  enactment  of  tlie  Webb-Pomerene  Law. 

The  American  Manufacturers  Export  Association  Is  also 
a  very  important  body,  which  is  doing  excellent  work  in  the 
promotion  of  foreign  trade.  It  keeps  in  close  touch  with  the 
United  States  consular  representatives  abroad  with  a  view  to 
informing  itself  of  every  important  opportunity  that  develops 
for  the  extension  of  American  trade  in  foreign  countries.  Its 
periodical  publications,  its  monthly  and  annual  meetings,  and 
its  personal  service  are  all  exceedingly  valuable. 

The  American  Exporters  and  Importers  Association  aims 
largely  to  promote  the  interests  of  export  and  import  mer- 
chants in  New  York  and  elsewhere. 

The  Philadelphia  Commercial  Museum  is  a  semiofficial 
organization  in  which  the  State  of  Pennsylvania  and  the 
City  of  Philadelphia  are  directly  concerned  and  under  whose 
patronage  it  is  operated.  The  work  of  the  museum  is  of  the 
greatest  value;  it  publishes  two. periodicals  on  foreign  trade 
and  also  certain  confidential  information  which  appears  in  its 
bulletins.  The  director  of  the  Foreign  Trade  Bureau  of  the 
museum  is  always  glad  to  give  information  regarding  the 
activities  of  the  bureau.  Everyone  interested  in  foreign  trade 
should  keep  in  touch  with  this  bureau. 

To  the  group  of  national  organizations  which  aid  in  the 
promotion  of  foreign  trade  also  belong: 

The  National  Association  of  ISIanufacturers,  New  York  City. 
The  Chamber  of  Commerce  of  the  United  States  of  America, 

Washington,  D.  C. 
The  Merchants  Association  of  New  York.  New  York  City. 
The  Chicago  Association  of  Commerce,  Chicago,  111. 

Each  of  these  four  associations  has  a  separate  department 
devoted  to  foreign  trade  promotion,  the  work  of  which  may 
properly  be  considered  as  national. 

The  activities  of  the  Chamber  of  Commerce  of  the  United 


T30 


MACHINERY    OF   FOREIGN    TRADE 


States  of  America  and  the  work  of  the  National  Association 
of  Manufacturers  are  too  generally  known  to  require  any  de- 
scription here. 

The  Merchants  Association  of  New  York  through  its  For- 
eign Trade  Department  is  doing  the  most  extensive  and  valu- 
able work  of  any  local  chamber  of  commerce  or  trade  organi- 
zation in  the  United  States.  It  is  decidedly  national  in  its 
membership,  scope,  and  purpose  and  is  particularly  useful  for 
the  reason  that  nearly  every  prominent  manufacturing  concern 
has  an  office  in  New  York,  and  also  the  metropolitan  city  is 
the  great  center  of  foreign  trade  activities  and  the  main  con- 
necting link  between  the  greatest  trading  points  of  the  world. 

The  Chicago  Association  of  Commerce  performs  a  corre- 
sponding service  for  the  Middle  West.  The  manufacturers  of 
that  locality  usually  maintain  offices  in  Chicago,  through  which 
they  keep  in  touch  with  the  activities  of  the  association. 

Local  Organizations 

Local  trade  associations  of  special  prominence  are: 

The  Philadelphia  Association  of  Commerce 

The  Detroit,   San  Francisco,  Cleveland,  Boston,   Baltimore, 

Pittsburgh,  and  St.  Louis  Chambers  of  Commerce 
New  Orleans  Association  of  Commerce 
The  Cincinnati  Foreign  Trade  Association 
The  Foreign  Trade  Club  of  San  Francisco 
The  Pittsburgh  Foreign  Trade  Commmission 
The  Associated  Chambers  of  Commerce  of  the  Pacific  Coast 

All  of  these  organizations  are  extending  their  facilities 
and  are  enthusiastic  advocates  of  foreign  trade  so  far  as  it 
concerns  their  local  interests. 

The  International  Organizations 

The  most  prominent  international  organization  for  trade 
development  is  the  Pan  American  Union,  Washington,  D.  C. 


ORGANIZATIONS    IN    THE   UNITED    STATES  131 

It  is  in  a  class  by  itself,  confining  its  work  to  the  promo- 
tion of  trade  and  amity  among  the  nations  of  the  Western 
Hemisphere.  Every  American  republic  contributes  to  the  sup- 
port of  this  Union.  Its  magnificent  buildings  are  largely  the 
gift  of  Andrew  Carnegie. 

Some  of  the  other  organizations  in  this  class  are: 

The  American  Asiatic  Association,  New  York  City 

All-Americans  Association,  Inc.,  New  York  City 

The  American-Russian  Chamber  of  Commerce,  New  York 

City 
The  Pan-American   Chamber  of  Commerce,   San   Francisco 
The  Japan  Association  of  North  America,  Seattle,  Wash. 
The  French  Chamber  of  Commerce  of  New  York  City 
The  Japan  Chamber  of  Commerce,  San  Francisco 
The  Holland-American  Chamber  of  Commerce,   San  Fran- 
cisco 
The  American-Polish  Chamber  of  Commerce,  New  York  City 
The  American-Roumanian   Chamber  of   Commerce,   New  York 
City 

There  are  also  Norwegian,  Spanish,  Swedish,  and  Italian 
Chambers  of  Commerce,  all  having  some  sort  of  organiza- 
tion and  place  in  New  York  City,  but  their  activities  are  of  no 
such  significance  as  those  of  the  organizations  enumerated 
above. 

The  American  Chamber  of  Commerce  for  the  Levant,  the 
Greek  Association,  and  a  number  of  similar  organizations  also 
aim  in  their  own  way  to  assist  our  foreign  trade  wdth  particu- 
lar nations. 

The  manufacturer  or  merchant  who  is  trying  to  make  con- 
nections with  one  of  the  countries  in  the  Far  East  will  do  w^ell 
to  communicate  with  the  American  Asiatic  Association  and  to 
subscribe  for  its  publication  Asia.  He  who  has  an  eye  on 
Russia  should  not  fail  to  become  acquainted  with  the  Ameri- 
can-Russian Chamber  of  Commerce,  and  those  who  are  doing 
or  contemplate  doing  business  in  Central  or  South  America 


132  MACHINERY   OF   FOREIGN   TRADE 

may  be  greatly  benefited  by  getting  in  touch  with  one  or  more 
associations  interested  in  the  promotion  of  our  commerce  with 
these  countries. 

Private  Organizations 

Recently  certain  large  banks  have  organized  foreign  trade 
bureaus  which  aim  to  supply  information  and  perform  other 
services  regardless  of  whether  the  person  seeking  their  aid  is 
a  customer  of  the  institution. 

Among  the  most  noted  of  these  are  the  National  City  Bank 
and  the  Guaranty  Trust  Company,  both  of  New  York  City. 
The  former  is  issuing,  for  gratuitous  distribution,  a  very  valu- 
able monthly  called  The  Americas  and  the  latter  sends  out 
periodically  papers  on  foreign  trade  which  are  interesting  and 
helpful  because  they  are  based  on  a  thorough  study  and  knowl- 
edge of  the  subjects  which  they  treat. 

A  good  many  newspapers  and  magazines  throughout  the 
United  States  maintain  information  bureaus  and  publish  bulle- 
tins relating  to  foreign  trade.  All  such  activities  are  very 
encouraging  and  are  fast  multiplying  and  extending. 

There  is  still  an  apparent  lack  of  co-ordination  among  the 
foreign  trade  organizations.  A  great  deal  of  the  work  done 
by  each  organization  is  duplicated  by  the  others  and  much 
money  and  intelligent  effort  is  wasted  in  consequence.  We 
still  need  a  great,  all-embracing,  national  foreign  trade  organi- 
zation co-ordinating  every  function  of  the  associations  named 
above  and  which  because  of  its  greater  resources  shall  enable 
these  associations  to  render  better  and  more  effective  service 
than  they  are  able  to  do  at  present,  even  through  their  com- 
bined efforts. 


CHAPTER    XVII 

THE  VALUE  OF  CO-OPERATION  IN  FOREIGN 

TRADE 

The  American  Trust 

Perhaps  nowhere  in  tlie  world  is  individualism  carried  to 
a  greater  extent  than  in  America.  The  American  business  man 
instinctively  prefers  to  play  the  game  alone  and  to  take  his 
chances  of  success  unencumbered  by  "entangling  alliances." 
Nevertheless  it  was  in  America  that  the  trust  came  into  being 
and  reached  its  highest  development,  flourishing  unrestrained 
until  its  abuse  of  power  resulted  in  its  regulation. 

The  American  trust  was  an  attempt  at  co-operation  which 
from  its  founder's  point  of  view  at  least  was  entirely  successful. 
The  original  trust  was  created  by  John  D.  Rockefeller,  by  the 
agreement  of  1882,  the  so-called  Standard  Oil  Trust  Agree- 
ment, by  virtue  of  which  the  management  of  all  the  Standard 
Oil  Companies  was  vested  in  a  body  of  nine  trustees  with 
Rockefeller  as  chairman.  The  success  which  followed  is  at- 
tributed largely  to  its  highly  centralized  and  efificient  organiza- 
tion and  its  elimination  of  waste  through  co-operative  methods. 

The  trustees  directed  the  numerous  activities  of  the  com- 
bination by  most  original  and  scientific  methods.  They  organ- 
ized various  committees,  such  as  that  on  marketing  and  that  on 
crude  oil.  These  committees  studied  the  oil  business  in  all  its 
phases,  received  reports  from  every  nook  and  corner  of  the 
world,  and  made  frequent  reports  to  the  board  of  trustees  who 
devised  plans  and  issued  orders  accordingly. 

In  the  wake  of  the  Standard  Oil  followed  the  Michigan  Salt 
Trust,  the  Whiskey  Trust,  the  Wire  Nail  Trust,  the  Pipe  Trust, 

133 


134  MACHINERY   OF   FOREIGN   TRADE 

the  Steel  and  Sugar  Trusts,  until  there  were  a  dozen  or  more 
mammoth  trusts  and  hundreds  of  smaller  ones  in  the  United 
States  at  the  time  of  their  dissolution  by  order  of  the  courts. 

Industrial  Combinations 

The  advocates  of  industrial  combinations  on  a  large  scale 
believe  that  instead  of  being  harmful  the  trusts  were  beneficial. 
Among  the  benefits  claimed  for  them  are  the  saving  in  produc- 
tion, transportation,  and  marketing — the  elimination  of  waste 
and  of  the  hazards  of  trade,  the  greater  co-ordination  of  eco- 
nomic forces,  and  the  greater  certainty  of  results. 

Those  who  inveighed  against  the  trusts  charged  them  with 
various  abuses  in  their  financing  and  methods  of  operation. 
They  accused  them  of  stifling  free  competition,  of  cutting  down 
prices  at  the  outset,  and  of  abnormally  increasing  them  when 
competition  was  destroyed.  They  claimed  that  the  trusts 
forced  competitors  into  disadvantageous  agreements  and  that 
they  were  guilty  of  generally  oppressive  and  tyrannical  conduct 
in  the  restraint  of  trade. 

The  consensus  of  the  intelligent  public  opinion  of  the  world, 
however,  seems  to  be  in  favor  of  industrial  combinations,  pro- 
vided they  are  properly  regulated  by  the  government. 

Combinations  Abroad 

The  benefits  of  co-operative  efiforts  have  always  been  under- 
stood abroad.  On  the  whole,  combinations  have  been  encour- 
aged, although  the  danger  of  abuse  has  been  clearly  realized 
and  guarded  against  by  stringent  governmental  regulation. 
Even  the  countries  that  have  hesitated  to  submit  their  domestic 
markets  to  the  restraints  which  such  combinations  entail,  have 
had  no  scruples  against  inflicting  them  on  their  foreign  markets 
and  the  strong  combines  of  our  foreign  competitors  have  given 
them  a  great  advantage  over  us  in  the  race  to  capture  the 
Vv^orld's  trade. 


THE  VALUE   OF   CO-OPERATION  135 

In  Germany  the  Kartcls,  as  such  combines  have  been  called, 
have  always  been  considered  as  model  trusts,  due  to  the  fact 
that  they  were  most  effectively  regulated  by  the  government, 
in  both  their  domestic  and  foreign  activities. 

A  new  phenomenon  appeared  in  Germany  during  the  war 
in  the  form  of  compulsory  Kartels.  Some  of  these  syndicates 
maintain  common  sales  departments  and  in  some  cases  they 
have  common,  centralized  purchasing  departments. 

In  England  a  special  law,  called  the  "New  Companies  Act," 
was  brought  forth  in  1900  for  the  purpose  of  meeting  the 
Kartels'  competition  and  of  assisting  the  export  trade  of  Great 
Britain.  At  the  close  of  the  Great  War  two  enormous  foreign 
trade  organizations,  the  British  Corporation  and  the  British- 
Italian  Corporation,  were  formed  in  Great  Britain  with  govern- 
ment support  and  with  a  similar  purpose. 

Somewhat  similar  organizations  have  been  formed  in 
France  and  in  Japan,  and  the  German  idea  of  industrial  com- 
bination has  been  followed,  if  not  copied,  by  a  number  of 
smaller  countries.  All  of  these  organizations  aim  to  bring 
about  the  control  of  prices  by  agreement,  the  adoption  of  the 
uniform  price  lists,  the  limitation  of  production,  and  the  deter- 
mination of  the  distribution  of  output. 

Possibilities  of  Co-operation 

Co-operation  may  be  neutral,  benevolent,  or  malevolent. 
When  it  benefits  no  one  and  hurts  no  one  outside  of  the  co- 
operative body  it  is  strictly  neutral.  When  it  benefits  some 
and  hurts  no  one  it  is  benevolent.  But  when  it  benefits  only 
the  co-operative  body  and  is  destructive  to  all  the  outsiders,  it  is 
malevolent — whether  it  be  a  gang  of  bandits,  a  "trust,"  or  an 
organization  of  the  state. 

All  organized  commercial  effort  is  bound  to  strive  to  over- 
come competition.  Such  is  its  primary  purpose  and  the  fact 
might  well  be  recognized  that  an  exceedingly  keen  competition 


1^6  MACHINERY    OF   FOREIGN    TRADE 

is  not,  in  its  last  analysis,  a  beneficial  factor,  nor  is  its  reguki 
tion  to  be  considered  as  destructive  to  general  welfare.     On  the 
other  hand,  the  entire  elimination  of  the  natural  play  of  com- 
petitive  effort  brings  about   a  monopoly   with   its   resultant 
tyranny,  and  is  far  worse  than  even  cut-throat  competition. 

To  what  extent  co-operative  effort  may  be  detrimental  to 
the  country  in  which  it  exists  is  a  political  cjuestion  to  be  deter- 
mined in  each  case  by  the  proper  legislative,  administrative,  and 
judicial  branches  of  the  government.  The  most  innocent  form 
of  co-operative  organization  may  become  destructive  in  its  ef- 
fects when  it  outgrows  its  benevolent  sphere,  deteriorates,  and 
lapses  into  ruthlessness. 

Co-operation  Without  Combination 

Co-operative  methods  are  not  confined  to  such  elaborate 
organizations  as  American  trusts  or  foreign  syndicates.  There 
is  a  simpler  and  more  natural  form  of  co-operation  which  has 
always  existed.  Such  is  the  union  of  two  or  more  persons  to 
attain  an  end  which  it  is  impracticable  for  either  to  attain 
singly.  All  co-operative  efforts  are  based  on  such  an  aim. 
They  are  to  be  distinguished  less  by  their  form  than  by  their 
methods  and  the  ends  for  which  they  strive. 

To  an  increasing  extent  groups  of  manufacturers  in  non- 
competing  lines  are  uniting  for  the  joint  export  and  sale  of 
their  products.  Usually  their  aims  are  merely  to  save  trans- 
portation and  selling  expenses  and  to  increase  the  efficiency  of 
their  organizations.  In  all  this  they  are  entirely  successful, 
especially  in  the  South  American  field. 

Hitherto,  it  has  been  almost  impossible  for  the  average 
American  manufacturer  of  modest  pretentions  to  enter  the  field 
of  foreign  trade  under  conditions  as  favorable  as  those  com- 
manded by  his  larger  competitor.  To  such  a  man  co-operative 
methods  mean  the  difference  between  success  and  failure.  In 
acting  in  conjunction  with  men  similarly  placed,  he  finds  him- 


THE   VALUE   OF   CO-OPERATION  137 

self  able  to  overcome  his  limitations.  The  very  considerable 
expense  involved  in  the  preliminary  investigation  of  the  market 
is  shared  by  others,  and  his  marketing  facilities  are  vastly 
improved. 

Such  co-operation  enables  the  small  manufacturer  to  ship 
his  goods  jointly  with  his  associates  and  thereby  to  secure  bet- 
ter rates  and  greater  facilities.  He  is  able  to  pass  on  to  his 
customers  the  benefit  of  his  economies  and,  what  is  of  even 
greater  importance,  he  can  offer  them  the  services  of  a  joint 
representative  to  whom  they  can  turn  in  case  anything  goes 
wrong.  This  connecting  link  between  seller  and  purchaser  is 
often  a  deciding  factor  in  making  a  sale. 

Advertising  in  foreign  fields  is  more  expensive  and  cum- 
bersome than  it  is  at  home  and  yet  it  must  be  attended  to.  In  a 
co-operative  organization  the  newspaper  advertising,  the  circu- 
larizing, and  the  personal  propaganda  work  can  be  made  to 
compare  in  both  quality  and  quantity  with  that  of  the  combined 
exporters  of  foreign  countries. 

Possibilities  of  the  Future 

Co-operation  in  foreign  trade,  so  far  as  the  American  trader 
is  concerned,  has  hitherto  been  retarded  by  the  anti-trust  laws. 
A  realization  of  the  disadvantage  under  which  the  American 
competed  in  foreign  trade  has  resulted  in  the  passage  of  the 
Webb-Pomerene  Act  which  modified  our  anti-trust  laws,  so  far 
as  foreign  trade  is  concerned,  and  makes  co-operative  methods 
legal. 

Unless  this  law  is  promptly  taken  advantage  of  by  the  small 
manufacturer  it  will  do  him  no  good  and  the  larger  exporters 
will  reap  the  benefits.  If  the  average  manufacturer  is  to  share 
with  these  larger  traders,  he  should  at  once  begin  to  agitate  for 
co-operation  through  his  trade  associations. 

Co-operation  is  destined  to  become  an  important  factor  in 
the  life  of  the  world  as  democracy  becomes  more  general.     The 


138  MACHINERY    OF   FOREIGN    TRADE 

reign  of  political  democracy  is  bound  to  be  followed  by  a  com- 
mercial democracy,  which  will  mean  a  more  extensive  and 
stronger  co-operation  between  the  competing  interests  within 
the  nation,  and  between  the  employer  and  his  employees. 

It  is  altogether  within  the  range  of  probability  that  in  the 
near  future  the  European  nations  will  unite  in  the  production 
and  distribution  of  the  common  necessities  and  that  such  a 
course  will  be  based  upon  the  industrial  alliances  within  each 
country.  In  such  an  event,  those  who  have  perfected  co-oper- 
ative trade  alliances  will  be  most  benefited  because  they  will 
have  established  their  organization  on  their  own  terms  while 
those  who  follow  will  have  to  accept  the  terms  dictated  by  the 
exigencies  of  the  moment.  The  nations  with  a  long  range  of 
vision  will  first  reap  the  rewards  of  the  future. 


CHAPTER   XVIII 

THE  WEBB-POMERENE  LAW 

Enactment  of  the  Webb-Pomerene  Law 

Every  exporter  or  would-be  exporter  should  be  thoroughly 
familiar  with  the  tenor,  the  significance,  and  the  application 
of  the  act  of  Congress  to  promote  export  trade,  commonly 
called  the  Webb-Pomerene  Law. 

This  act  practically  negatives  the  application  to  export  trade 
of  former  anti-trust  legislation  embodied  in  the  Sherman  Act 
of  Congress  of  July,  1890,  to  protect  trade  and  commerce 
against  unlawful  restraints  and  monopolies,  and  in  the  supple- 
mentary act  of  October,  19 14;  in  other  words  it  permits  the 
formation  of  trusts  in  export  trade. 

The  term  "trust"  in  its  limited  commercial  sense  is  com- 
monly used  to  denote  an  industrial  combination  embracing  a 
peculiar  form  of  business  association  effected  by  the  transfer 
of  stock  by  the  stockholders  of  the  component  corporation  to  a 
board  of  trustees,  to  be  voted  by  them  as  they  see  fit. 

In  this  sense  the  term  connotes  in  the  popular  mind  an 
agreement  or  combination  believed  to  be  formed  with  the  in- 
tent of  monopolizing  a  certain  kind  of  business,  restraining 
trade,  and  controlling  competition  and  prices  in  the  given  line 
or  several  lines  of  product. 

Thus  every  large  consolidation  of  industry  has  been  looked 
upon  as  a  "trust,"  whether  it  is  made  up  of  several  plants  or  of 
a  hundred,  and  whether  such  "trust"  actually  involves  monopo- 
listic features  or  not.  So  long  as  such  an  organization  has  the 
power  to  interfere  with  competition,  to  control  business,  and 
to  fix  prices,  the  term  "trust"  will  be  applied  to  it. 

139 


140  MACHINERY   OF   FOREIGN   TRADE 

The  idea  that  the  trusts  are  a  menace  to  public  welfare  and 
destructive  of  the  freedom  of  individual  endeavor  has  been  so 
persistently  kept  before  the  public  mind  by  writers  and  public 
men  that  it  has  brought  about  the  enactment  of  stringent  legis- 
lation against  them. 

This  legislation  resulted,  however,  in  preventing  the  Ameri- 
can exporter  from  meeting  the  competition  of  other  nations  by 
co-operative  methods.  A  realization  of  the  handicap  under 
which  they  labored  was  one  reason  which  led  to  the  enactment 
of  the  new  law,  known  as  the  Webb-Pomerene  Act.  But  per- 
haps the  certainty  that  after  the  war  the  gigantic  organization 
of  industry  and  commerce  abroad  will  proceed  at  a  more  accel- 
erated pace,  was  the  most  potent  stimulus  for  haste  in  passing 
this  new  law. 

Doubtless,  without  any  desire  to  imitate  the  European  sys- 
tem of  governmental  supervision  over  the  combines,  but  guided 
by  a  strong  conviction  that  only  by  means  of  governmental 
supervision  could  the  evils  of  the  trust  be  avoided  and  their 
benefits  secured,  a  certain  amount  of  governmental  supervision 
of  the  concerns  wishing  to  take  advantage  of  the  new  law  has 
been  provided  for  through  the  medium  of  the  Federal  Trade 
Commission. 

General  Provisions  of  the  Law 

Briefly  then,  the  so-called  Webb  Law  authorizes  the  forma- 
tion of  an  export  association  to  be  composed  of  "any  corpora- 
tion or  combination  by  contract  or  otherwise,  of  two  or  more 
persons,  partnerships  or  corporations."  Such  an  association 
for  export  may  be  formed  whenever  conditions  make  it  advis- 
able that  for  a  better  exploitation  of  foreign  markets  an  ar- 
rangement should  be  entered  into  for  co-operation  between 
competing  concerns. 

Some  of  the  arrangements  which  may  now  be  made  within 
the  provisions  of  the  law  are  as  follows: 


THE   WEBB-POMERENE   LAW  14I 

Division  of  sales  territory 
Allocation  of  foreign  markets 
Apportionment  of  output  for  export 
Allotment  of  terms  of  export  sales 
Allotment  of  export  orders 
Pooling  foreign  business 
Allotment  of  prices  to  foreign  buyers 
Allotment  of  grades  in  export  output 
Joint  export  sales  organization 

But  such  arrangements  or  agreements  must  be  entered  into 
"for  the  sole  purpose  of  engaging  in  trade  or  commerce  only 
in  goods,  wares  or  merchandise,  exported  or  in  the  course  of 
being  exported  from  the  United  States  or  any  territory  thereof 
to  any  foreign  nation,"  otherwise  they  will  come  within  the  pro- 
visions of  the  anti-trust  laws. 

In  the  same  act  the  association  so  formed  is  not  only  re- 
stricted in  its  activities  to  exports  alone,  but  it  is  specifically 
provided  that  the  provisions  of  the  law  concerning  freedom 
from  restraint  and  exemption  from  anti-trust  laws  do  not 
apply  to  "the  production,  manufacture,  or  selling  for  con- 
sumption or  for  resale,  within  the  United  States  or  any 
Territories  thereof,  of  such  goods,  wares,  or  merchandise,  or 
any  act  in  the  course  of  such  production,  manufacture,  or 
selling  for  consumption  or  for  resale." 

And  furthermore  the  association  ic  forbidden  to  restrain 
trade  within  the  United  States  or  to  commit  acts  in  restraint  of 
the  export  trade  of  any  domestic  competitor  of  such  association, 
or  for  the  association  either  in  the  United  States  or  elsewhere 
to  enter  into  any  agreement,  understanding,  or  conspiracy,  or 
to  do  any  act  which  artificially  or  intentionally  enhances  or 
depresses  prices  within  the  United  States  of  commodities  of  the 
class  exported  by  such  association.  Nor  can  it  "substantially" 
lessen  competition  within  the  United  States  or  otherwise  re- 


142  MACHINERY   OF   FOREIGN   TRADE 

strain  trade  therein.     (See  Appendix  A  for  text  of  the  Webb- 
Pomerene  Law.) 

Methods  of  Control 

Whenever  the  Federal  Trade  Commission  may  have  rea- 
sons to  believe  that  any  unlawful  act  of  the  character  just  men- 
tioned has  been  committed  it  is  given  power  to  summon  any 
officer  of  the  association  or  other  persons  it  may  choose  for  the 
purpose  of  conducting  an  investigation  into  the  acts  of  the  asso- 
ciation. If  it  should  be  found  that  the  law  has  been  violated, 
the  Commission  may  suggest  readjustment  in  the  business  of 
the  association,  so  that  it  may  be  conducted  according  to  law. 
If  the  association  fails  to  comply  with  recommendations  of  the 
Commission,  the  case  shall  be  referred  to  the  Attorney-General 
of  the  United  States  "for  such  action  as  he  may  deem  proper." 

This  is  one  method  of  governmental  control  established  by 
law  over  the  association,  which  in  so  far  as  export  trade  is  con- 
cerned has  all  the  power  of  becoming  a  so-called  trust  and  with- 
out being  subject  to  the  anti-trust  laws. 

The  other  method  of  control  by  the  government  is  the  spe- 
cific and  mandatory  provision  in  the  act  that  each  association 
organized  for  export  by  means  of  a  "contract  or  otherwise,  of 
two  or  more  persons,  partnerships  or  corporations"  must, 
in  30  days  from  the  time  of  its  formation,  file  with  the  Federal 
Trade  Commission  the  following  verified  statements  and  items: 

1.  The  location  of  the  offices  of  the  association  and  places 

of  business. 

2.  The  names  and  addresses  of  all  its  officers. 

3.  The  names  and  addresses  of  all  Its  stockholders  or 

members. 

4.  If  a  corporation,  a  copy  of  its  certificate  or  articles  of 

incorporation  and  by-laws. 

5.  If  not  a  corporation,  a  copy  of  articles  or  contract  of 

association. 


THE   WEBB-POMERENE  LAW  143 

On  the  first  of  January  of  each  year  a  like  statement  with 
all  the  changes  which  have  occurred  is  required  to  be  filed  with 
such  other  information  as  the  Commission  may  demand. 

A  penalty  of  forfeiture  of  certain  rights  is  provided  for, 
and  $100  as  a  fine  for  each  and  every  day  of  failure  to  comply 
with  the  law.  If  those  who  file  the  above  documents  have  com- 
plied with  the  law  in  other  respects,  the  mere  filing  of  the  pre- 
scribed papers  qualifies  them  as  an  export  association  and 
entitles  them  to  all  the  provisions  and  benefits  of  the  law. 

So  much  for  the  general  letter  and  tenor  of  the  law.  It  is 
plain  enough.  In  some  instances,  however,  it  is  not  likely  to  be 
so  easy  to  put  it  into  practice. 

Forms  of  Combination 

The  course  is  clear  if  the  exporting  concern  plans  to  con- 
duct foreign  business  through  a  subsidiary  selling  organization 
of  its  own,  and  desires  to  avail  itself  of  the  benefits  afforded  by 
the  Webb-Pomerene  Law  only  to  the  extent  of  making 
arrangements  with  other  concerns  from  time  to  time  as  the 
necessity  arises.  Such  arrangements  may  be  a  contract  for  the 
apportionment  of  territory,  orders,  or  profits,  or  may  provide 
for  the  regulation  of  prices  in  one  or  more  foreign  markets. 

It  is  not  so  easy  to  make  use  of  the  law  when  one  contem- 
plates the  creation  of  a  joint  selling  organization  into  which 
the  export  activities  of  a  number  of  competing  concerns  are 
merged.  There  is  an  infinite  variety  in  types  of  such  selling 
organizations,  which  can  be  devised  and  oftentimes  it  is  diffi- 
cult to  decide  just  which  type  is  best  suited  to  a  given  case.  It 
may  be  that  the  participating  concerns  cannot  agree  among 
themselves  on  a  definite  arrangement  as  to  the  management,  the 
stock  distribution,  or  the  method  of  buying  or  selling.  In  such 
a  case  a  different  scheme  for  a  selling  combination  may  effec- 
tively meet  all  the  requirements. 

The  same  may  be  said  regarding  the  agreements  authorized 


144 


MACHINERY   OF  FOREIGN   TRADE 


by  the  law  between  different  concerns  engaged  in  foreign  trade 
each  of  which  operates  its  own  selHng  organization.  Such 
agreements  may  relate  to  the  pooling  of  business,  territory,  pro- 
fits, losses,  etc.  One  arrangement  may  be  practical  in  one  mar- 
ket, another  arrangement  in  another,  according  to  the  condi- 
tions in  a  particular  territory  abroad  or  in  the  industry  at  home. 

Wide  Range  of  Possibilities 

The  Webb-Pomerene  Law  allows  any  exporter  in  the 
United  States  to  act  in  combination  with  any  other  American 
exporting  concern  at  home  or  abroad,  or  with  as  many  as  he 
may  choose  under  any  agreement  which  they  may  make  among 
themselves  relative  to  export  trade  in  America  or  trade  in  any 
foreign  market.  It  requires,  however,  that  such  agreement 
shall  not  unlawfully  interfere  with  trade  within  the  United 
States  and  shall  not  affect  other  American  exporters  with  un- 
fair methods  of  competition. 

One  of  the  arrangements  that  may  be  effected  is  the  crea- 
tion of  a  separate  organization — be  it  a  corporation,  partner- 
ship, a  common  sales  office  abroad,  a  joint  marketing  agency, 
individual  foreign  sales  branch,  an  exclusive  agency,  or  any 
kind  of  an  understanding  through  an  agreement. 

The  agreements  may  be  made  and  changed  as  and  when 
occasions  arise  in  conformity  with  the  widely  different  require- 
ments of  widely  different  markets  and  the  demands  of  industry, 
product,  and  selling  conditions  and  methods  in  the  exploited 
countries. 

The  foreign  business  of  the  United  States  has  been  con- 
ducted heretofore  by  various  methods  and  through  varied  types 
of  selling  organizations.  There  are  the  export  merchants  and 
the  export  commission  houses.  When  a  concern  engages  in 
direct  exporting,  there  are  several  courses  open.  It  may  dis- 
tribute by  means  of  a  separate  company  which  may  be  an 
allied  company,  a  selling  company,  or  an  independent  company. 


THE   WEBB-POMERENE   LAW  145 

Again  it  may  conduct  its  business  through  a  separate  export 
department  of  the  general  selHng  organization,  or  the  general 
selling  organization  may  be  so  planned  that  it  handles  both 
foreign  and  domestic  sales. 

There  are  foreign  and  domestic  corporations,  copartner- 
ships, or  individuals  trading  under  a  firm  name,  but  whatever 
the  form  of  the  organization  it  is  entitled  to  the  provisions  of 
the  Webb-Pomerene  Law. 

The  Law  Designed  to  Aid  Foreign  Trade 

It  is  obvious  that  the  law  was  created  for  the  relief  of  the 
American  export  trade  and  with  a  view  to  affording  advantages 
to  the  American  exploitation  of  foreign  markets.  It  is  de- 
signed solely  to  assist  in  the  sale  of  the  American  products 
abroad  and  to  aid  in  overcoming  competition  in  foreign  mar- 
kets. To  that  end  all  the  instrumentalities  already  in  exis- 
tence should  be  utilized  to  the  fullest  extent  when  conditions 
so  require. 

If,  for  instance,  a  manufacturer  may  not  find  it  practicable 
to  organize  an  export  selling  combine  or  may  not  be  desirous 
of  entering  such  combine,  he  may  make  export  arrangements 
with  some  existing  export  concern,  agreeing  to  utilize  its  organ- 
ization and  consenting  to  some  pooling  arrangement  of  terri- 
tory, prices,  export  orders,  etc. 

It  may  be  that  certain  domestic  concerns  or  even  some  of 
the  export  houses  as  now  constituted  cannot  qualify  as  an  asso- 
ciation under  the  law  by  merely  filing  the  agreement  with  the 
other  documents.  In  such  cases  a  reorganization  with  either 
reincorporation  or  with  the  organization  of  one  or  more  new 
corporations  will  be  necessary  or  advisable  not  only  to  comply 
with  the  law  but  also  for  the  purpose  of  carrying  on  sales  and 
fulfilling  the  agreements. 

Various  pooling  arrangements  and  other  selling  methods  to 
overcome  competition  practiced  by  the  trusts  are  legalized  by 


146  MACHINERY   OF   FOREIGN   TRADE 

the  Webb-Pomerene  Law  between  competing  concerns.  Such 
arrangements  as  the  law  allows  may  include  an  entire  industry, 
or  but  a  few  concerns,  and  it  is  a  matter  of  indifference 
whether  the  concerns  so  combined  for  export  trade  remain  com- 
petitors in  the  domestic  trade.  But  such  arrangements  can 
only  be  made  by  means  of  one  or  more  export  associations  as 
provided  in  the  law. 

Frequently  it  may  be  most  practicable  to  preserve  the  indi- 
viduality and  independence  of  the  concerns  desirous  of  making 
arrangements  now  permitted,  as  in  the  case  of  a  branch  house, 
a  special  selling  concern,  a  jobber,  an  export  house,  or  a  pro- 
ducing concern.  In  such  cases  the  concerns  may  qualify  as 
separate  export  associations,  after  which  they  can  enter  into 
the  pooling  or  other  arrangements  allowed  to  such  associations. 
In  some  cases,  as  has  been  said,  a  reorganization  or  new  incor- 
poration may  be  found  necessary  in  order  to  comply  with  all  the 
provisions  of  the  act. 

Advantages  of  the  Law 

The  advantages  accruing  to  the  American  trader  from  the 
Webb-Pomerene  Law  are  numerous.  The  law  has  been 
framed  largely  with  an  eye  to  the  business  which  will  follow  the 
signing  of  the  treaty  of  peace.  But  while  it  will  be  of  vast  aid 
to  American  industry  in  overcoming  the  unified  tactics  of 
European  manufacturers  and  traders  and  in  securing  our  share 
of  the  trading  that  will  run  into  many  billions  of  dollars,  it  will 
also  serve  as  well  in  advancing  the  world  interests  of  our 
smaller  manufacturers.  It  has  become  obvious  that  in  the  past 
extensive  competition  in  foreign  trade  has  been  productive  of 
much  harm  that  can  be  eliminated  in  the  future  through  the  in- 
strumentality of  the  new  law.  The  most  obscure  manufacturer 
is  as  much  entitled  to  the  benefits  of  the  law  as  is  the  largest 
industrial  combine,  but  he  must  know  how  to  avail  himself  of 
all  its  provisions  and,  most  important  of  all,  he  must  act. 


THE   WEBB-POMERENE   LAW  147 

This  law  should  enable  the  United  States  to  duplicate  the 
achievement  of  Great  Britain  after  the  Napoleonic  Wars,  when 
the  people  of  that  empire  reaped  the  golden  harvest  of  the  re- 
construction period  that  followed.  It  is  also  an  attempt  to 
avoid  the  overpowering  influence  of  paternalism  by  providing 
a  means  by  which  the  resourcefulness  and  individuality  of  the 
American  exporter  can  assert  themselves  without  governmental 
interference  with  the  freedom  of  American  commerce. 

The  law  is  far  from  being  perfect.  It  is  not  broad  enough 
and  not  definite  enough.  But  nothing  is  perfect  in  the  begin- 
ning. As  time  goes  on  the  defects  will  be  remedied.  With 
time,  experience,  and  ever-changing  conditions  the  amended 
law  will  conform  to  the  spirit  of  the  times.  It  will  not  be  long 
before  its  provisions  will  find  their  way  into  the  courts  and 
the  interpretation  of  some  of  its  terms  by  American  tribunals 
will  hasten  its  complete  understanding. 

Many  exporters  who  still  feel  uncertain  as  to  the  full  impli- 
cations of  the  act  and  the  extent  of  the  possibilities  that  it 
opens  to  them,  have  consulted  with  the  Federal  Trade  Com- 
mission and  have  sometimes  referred  their  plans  to  it  for 
approval  before  putting  them  into  operation.  While  the  law 
anticipates  no  such  procedure  and  such  advice  is  unofficial  this 
extra  legal  function  may  prove  a  most  useful  part  of  the 
Commission's  duties. 


CHAPTER   XIX 

EXPORT  ORGANIZATIONS  AND  COMBINATIONS 

Growth  of  Foreign  Sales  Combines 

The  same  forces  and  tendencies  which  have  resulted  in 
the  growth  of  selling  organizations  and  combines  in  the  United 
States  operate  to  form  similar  organizations  for  the  sale  of 
our  products  abroad.  The  export  combine  or  selling  trust, 
however,  enjoys  one  important  advantage.  The  acts  and 
policy  of  the  domestic  organization  frequently  incur  the  ban 
of  the  law  and  may  be  adjudicated  to  be  "unfair  competition" 
and  "in  restraint  of  trade."  The  acts  and  policy  of  the  export 
organization  only  incur  the  risk  of  foreign  governmental  pro- 
hibition or  control  when  the  methods  are  considered  to  be 
injurious  to  the  trade  of  the  country  in  which  operations  are 
carried  on.  As  foreign  governments  have  hitherto  viewed 
the  operations  of  trusts  and  combines  with  much  more 
equanimity  than  the  United  States  government,  it  is  to  be  ex- 
pected that  considerable  more  latitude  will  be  allowed  the  ac- 
tivities of  the  trust  or  combine  working  in  a  foreign  field 
than  is  allowed  when  the  same  activities  are  carried  on  in 
the  domestic  market. 

Specialty  Foreign  Sales 

When  the  individuality  and  special  features  of  the  article 
to  be  exported  are  their  chief  selling  points,  the  advantages  to 
be  derived  from  co-operative  sales  efforts  are  hardly  sufficient 
recompense  for  the  difficulties  to  be  overcome  in  forming  a 
joint  selling  organization.  The  sale  of  such  highly  specialized 
articles  as  office  devices  and  appliances,  machinery,  cash  regis- 

148 


EXPORT  COMBINATIONS  149 

ters,  sewing  machines,  automobiles,  shoes,  farm  machinery, 
and  so  on,  depends  largely  upon  bringing  the  advantages  of 
the  specialties  to  the  attention  of  the  customer  and  making  him 
acquainted  with  their  utility  and  the  method  of  their  use. 
Such  sales  call  for  highly  trained  salesmanship.  The  individual 
effort  which  each  sale  requires  is  obviously  the  sole  concern 
of  the  manufacturer  or  exporter  and  cannot  be  delegated  to 
the  representatives  of  any  association  of  either  competing  or 
non-competing  exporters. 

It  is  true  that,  given  a  product  of  merit  and  individuality, 
orders  will  be  received  for  it  in  a  more  or  less  spasmodic 
fashion  from  all  quarters  of  the  globe.  But  if  the  manufac- 
turer of  a  specialty  is  desirous  of  developing  any  foreign  coun- 
try intensively,  then  his  sales  campaign  abroad  must  be  just 
as  much  an  individual  enterprise  as  his  sales  campaign  at  home. 
When  independent  action  is  the  logical  course  to  follow, 
it  will  usually  be  found  that  the  methods  which  have  proved 
effective  in  the  home  market  will  prove  equally  effective 
abroad,  after  any  modifications  have  been  made  which  are  dic- 
tated by  custom  and  the  peculiarities  of  national  taste. 

Staple  Foreign  Sales 

The  benefits  to  be  derived  from  combinations  formed  to 
develop  foreign  trade  and  cultivate  particular  fields  are  prac- 
tically limited  to  the  producers  and  manufacturers  of  certain 
kinds  of  staple  goods.  For  instance,  American  manufacturers 
of  nuts,  screws,  bolts,  and  similar  hardware,  the  cheaper  lines 
of  cotton  piece  goods,  steel,  cement,  etc.,  are  able  by  means  of 
their  large-scale  methods  of  production  or  by  superior  facilities 
for  the  purchase  of  raw  materials,  to  offer  such  staples  at 
competitive  prices  in  almost  any  market  of  the  world.  Again, 
producers  of  lumber,  cotton,  copper,  and  other  raw  materials 
which  are  indigenous  to  this  country  find  little  or  no  difficulty 
in  entering  the  foreign  markets. 


I50  MACHINERY   OF   FOREIGN   TRADE 

One  important  factor  which  often  represents  the  margin 
between  profit  and  loss  in  the  sale  of  such  staples  is  selling 
expense.  The  manufacturer  of  a  specialty  can  often  add  a 
round  lOO  per  cent  to  his  cost  to  cover  selling  expense,  but 
if  the  price  of  a  staple  includes  a  considerable  margin  for  this 
item,  it  cannot  be  offered  at  a  competitive  price.  One  of  the 
means  of  reducing  this  factor  to  the  minimum  is  to  sell  in  large 
volume.  If  this  volume  is  big  enough  for  the  orders  to  be 
pooled  among  a  number  of  manufacturers  and  the  cost  of  the 
sales  campaign  are  also  pooled,  it  is  obvious  that  the  selling 
expense  then  sinks  to  a  negligible  factor  in  the  sales  price. 

The  manufacturer  or  producer  of  any  of  the  commodities 
listed  above  and  many  others  besides  would  find  it  a  difficult 
if  not  impossible  task  to  build  up  a  lucrative  foreign  trade 
working  alone  as  an  independent  exporter.  He  could  not  carry 
stocks  at  strategic  points  abroad ;  the  volume  of  his  shipments 
would  not  enable  him  to  obtain  the  lowest  freight  rates;  and 
in  a  hundred  and  one  ways  he  would  be  handicapped  in  com- 
petition with  either  an  e>:port  combine  or  a  foreign  producer 
handling  his  particular  product.  Therefore  for  the  small  man- 
ufacturers or  producers  of  staple  articles,  a  combination  of 
effort  is  often  the  only  practical  means  of  gaining  a  firm  foot- 
ing in  foreign  markets. 

Types  of  Sales  Organizations 

The  types  of  sales  organizations  formed  by  manufacturers 
and  producers  of  staple  articles  for  the  sale  of  their  products 
abroad  may,  for  purposes  of  discussion,  be  divided  into: 

1.  Jointly  controlled  selling  organizations 

2.  Co-operative  sales  organizations 

3.  The  selling  combine 

As  noted  above,  the  general  policy  of  such  combinations 
abroad  would  be  much  the  same  as  in  the  domestic  market.  The 


EXPORT  COMBINATIONS 


151 


advantages  of  combinations  in  export  trade,  in  addition  to 
those  previously  discussed,  would  be  derived  from  the  added 
strength  given  to  particular  trades  or  industries  in  competition 
with  similar  trades  or  industries  abroad.  The  precise  method 
of  forming  such  a  combination  is  a  problem  for  each  trade 
to  solve  and  the  subject  here  can  only  be  profitably  discussed 
by  a  very  brief  statement  or  description  of  the  methods  adopted 
in  particular  cases. 

Jointly  Controlled  Selling  Organization 

In  the  sense  in  which  the  term  "jointly  controlled  selling 
organization"  is  generally  used,  it  denotes  an  organization  that 
may  have  a  certain  degree  of  real  independence  but  whose  dis- 
tinguishing characteristic  is  that  it  pools  the  export  activities 
of  a  number  of  previously  competing  concerns  into  a  single 
selling  organization.  This  is,  perhaps,  the  type  of  selling  or- 
ganization that  has  been  most  benefited  by  the  new  law. 

With  an  organization  of  this  character  it  is  to  be  expected 
that  there  may  arise  some  difficulty  in  securing  the  singleness 
of  purpose,  unanimity  of  direction,  and  steadfastness  of  policy 
which  are  the  marked  characteristics  of  the  singly  controlled 
organization.  Nevertheless  with  good  management,  the  right 
sort  of  organization  basis,  and  the  willingness  of  the  participat- 
ing concerns  to  subordinate  their  individual  opinions  to  the 
common  interests,  it  can  be  made  to  work  smoothly  and  most 
effectively. 

In  view  of  the  freedom  afforded  by  the  Webb-Pomerene 
Law  to  fix  prices  to  foreign  buyers,  to  allot  export  orders,  to 
allocate  foreign  markets,  to  pool  foreign  business,  and  to  ap- 
portion foreign  territory,  it  is  safe  to  assume  that  the  joint 
selling  organization  will  become  very  popular.  The  law  per- 
mits a  variety  of  arrangements  for  its  creation  and  for  Its 
development,  a  variety  limited  only  by  the  ingenuity  of  the  pro- 
moters and  their  legal  advisers. 


152  MACHINERY  OF  FOREIGN  TRADE 

Typical  Plan  of  Jointly  Controlled  Selling  Organization 

The  following  is  a  typical  example  of  the  plan  under  which 
a  joint  selling  organization  may  be  formed  and  operated: 

A  number  of  competing  manufacturers  in  a  given  industry 
get  together  and  organize  a  joint  selling  organization  for  ex- 
port with  a  capital  stock,  say,  of  $300,000,  of  which  two-thirds 
is  8  per  cent  cumulative  preferred  stock  and  the  rest  common 
stock  without  par  value.  The  common  stock  is  to  be  used  as 
a  bonus,  one  share  of  common  stock  being  given  with  each  two 
shares  of  the  preferred  stock.  The  preferred  stock  will  be  sub- 
scribed by  the  concerns  actually  participating  in  the  joint  selling 
arrangement.  These  concerns  will  be  the  only  holders  of  stock 
in  the  new  company,  and  their  holdings  will  be  apportioned 
according  to  the  amount  of  their  export  output.  But  no  par- 
ticipating concern  will  have  more  than  one  vote  regardless  of 
the  amount  of  stock  it  holds,  and  no  concern  can  obtain  con- 
trol of  the  majority  of  the  stock.  The  terms  of  payments  for 
stock  may  be  one-half  down  and  the  balance  subject  to  call  in 
amounts  of  from  10  to  50  per  cent  at  a  time.  Each  concern  is 
to  be  represented  on  the  board  of  directors  of  the  selling  organ- 
ization which  will  determine  the  policies  of  the  organization 
and  direct  their  execution.  The  active  direction  may  be  vested 
in  a  small  executive  committee  of  from  three  to  five  members, 
composed  perhaps  of  the  principal  employees  of  the  company. 
Each  participating  concern  may  agree  to  sell  its  entire  ex- 
port output  through  the  joint  company  during  the  life  of  the 
agreement  and  to  standardize,  mark,  label,  pack  and  ship,  and 
pay  all  freight  and  other  charges  to  the  seaboard  as  and  when 
directed  by  the  joint  company.  The  export  shipments  will  con- 
sist of  a  certain  percentage  allotted  to  each  producer  by  the 
joint  company,  this  percentage  to  be  in  proportion  to  the  whole 
production  in  each  case  and  to  consist  of  specified  grades.  The 
joint  concern  will  fix  the  prices  at  which  each  participating  con- 
cern may  sell  its  product.     It  will  bill  and  collect  the  purchase 


EXPORT  COMBINATIONS  1 53 

price  in  its  own  name  and  according  to  its  own  terms.  For  the 
products  shipped  by  the  participating  concerns  at  its  order,  the 
joint  corporation  will  pay  according  to  the  system  in  vogue  in 
the  particular  industry  (usually  90  days  in  domestic  shipments, 
with  a  discount  of  2^  per  cent  for  cash).  The  prices  may  be 
arrived  at  in  several  ways — either  by  allotting  some  orders  to 
the  concern  quoting  the  lowest  prices,  or  by  making  an  agree- 
ment from  time  to  time  in  advance  to  buy  from  each  concern 
certain  quantities  and  grades  at  specified  prices,  or  merely  by 
taking  an  option  on  them.  The  excess  obtained  over  the  pur- 
chase price  may  be  used  either  in  paying  dividends  on  the 
preferred  stock  or  for  setting  aside  funds  for  reserves  and  the 
budget.  The  balance,  if  any,  can  be  used  in  making  a  rebate 
to  each  participating  concern  in  the  proportion  which  the 
amount  of  export  output  guaranteed  by  each  participant  bears 
to  the  aggregate  amount  of  similar  export  output  guaranteed 
by  all  participants,  or  the  surplus  balance  may  be  distributed 
in  the  form  of  dividends  to  each  participating  concern  accord- 
ing to  the  amount  of  its  holdings  in  the  joint  company. 

It  goes  without  saying  that  before  the  corporation  is  defi- 
nitely organized  a  man  experienced  in  foreign  trade  should  be 
secured  as  a  manager.  He  will  formulate  plans  for  the  selling 
campaign.  A  connection  should  also  be  established  with  one 
or  two  strong  banks,  which  have  either  branches  abroad  or 
influential  representatives  on  the  ground. 

Co-operative  Sales  Organization 

Another  expedient  for  a  jointly  controlled  selling  organiza- 
tion that  does  not  care  to  undertake  its  own  distribution  either 
in  whole  or  in  part,  is  to  become  a  member  of  a  co-operative 
sales  association.  The  term  "co-operative"  is  generally  under- 
stood among  exporters  to  apply  to  non-competitive  producers. 
There  are  already  many  such  concerns.  The  fact  that  they 
are  non-competitive  does  not  prevent  them  from  qualifying 


154  MACHINERY   OF  FOREIGN  TRADE 

under  the  Webb-Pomerene  Law  or  from  combining  their  or- 
ganizations in  some  markets  abroad  with  competitive  concerns 
under  the  agreements  authorized  by  the  law. 

There  are  numerous  systems  of  co-operative  distribution 
and  purchasing  in  England  and  on  the  Continent.  Great 
Britain  has  made  a  greater  advance  in  social-economic  co- 
operation than  any  other  country  in  the  world.  It  is  calculated 
that  more  than  one-sixth  of  the  British  population  has  its 
economic  wants  wholly  or  partly  supplied  through  the  co- 
operative methods  of  such  organizations  as  the  North  of  Eng- 
land Wholesale  Society  and  The  Scottish  Wholesale  Society. 
Some  of  these,  including  the  famous  Rochdale  Society,  own 
purchasing  and  forwarding  depots  in  New  York,  Hamburg, 
Copenhagen,  and  other  cities  in  different  parts  of  the  world. 
A  number  of  such  co-operative  societies  in  England  have  their 
own  steamship  lines  and  banks  and  operate  their  own  dis- 
tributing and  retail  centers.  With  these  organizations,  as  well 
as  with  purchasing  and  selling  syndicates  and  combines  of 
England  and  of  the  Continent,  the  American  exporters  will 
have  to  reckon  seriously. 

Co-operative  organizations  for  foreign  trade  are  not  very 
numerous  in  America,  although  some  concerns  which  could 
be   placed   in   this   class,    such    as   the    National    Paper    and 
Type  Company  and  the  Parsons  Trading  Company,  are  doing 
very  well.     The  co-operative  type  of  selling  organization  for 
export  is  especially  well  adapted  to  non-competing  products 
and  there  is  not  the  least  doubt  that,  as  the  development  of  our 
foreign  trade  progresses,  this  type  of  organization  will  come 
more  and  more  into  its  own.     We  have  a  vast  army  of  pro- 
ducers who  either  feel  that  they  are  as  yet  too  small  to  enter 
foreign  trade  alone  or  even  as  a  part  of  a  joint  sales  arrange- 
ment with  a  competing  concern,  or  who  have  but  a  very  small 
output  for  export  because  of  the  demand  for  their  product  in 
home  markets. 


EXPORT  COMBINATIONS  155 

Some  observers  believe  that  the  co-operative  type  of  selling 
organization  will  become  the  predominant  type  in  the  foreign 
field,  competing  successfully  with  every  other  type  of  export 
sales  organization  and  ultimately  supplanting  it  in  the  same 
way  that  our  department  and  chain  stores  are  supplanting  the 
older  methods  of  retail  distribution. 

Example  of  Co-operative  Sales  Organization 

The  following  case  is  typical,  in  broad  outline,  of  the 
methods  of  forming  a  co-operative  sales  organization.  The 
details  of  the  agreement  will  of  course  vary  with  circumstances 
and  the  kind  of  product  to  be  sold.  In  this  example,  the  or- 
ganization consists  of  a  corporation  formed  by  a  number  of 
manufacturers  of  non-competing  food  products.  Many  of 
these  products  can  be  more  readily  handled  as  a  complete  line 
than  they  can  be  sold  separately. 

The  capital  of  the  corporation  is  $100,000  obtained  by 
an  issue  of  partly  paid  common  stock,  the  balance  being  subject 
to  call  in  case  of  necessity.  A  prerequisite  to  membership  in 
the  organization  is  the  signing  of  an  agreement  which  binds 
the  manufacturer  to  grant  the  exclusive  foreign  sale  of  his 
goods  to  the  corporation.  The  corporation  on  its  part  buys 
from  the  manufacturer  at  a  price  determined  by  market  quota- 
tions, less  a  commission  of  3^  per  cent  for  expenses,  and 
retains  any  further  profit  on  the  sale  if  the  selling  price  to  the 
consumer  results  in  such  profit.  When  an  order  is  obtained 
which  cannot  be  filled  by  an  individual  manufacturer  within  the 
delivery  date  specified,  the  sale  is  divided  among  two  or  more 
producers  in  proportion  to  their  average  domestic  sales. 

Shipments  are  paid  for  either  on  the  delivery  of  the  goods 
at  the  port  of  embarkation  and  the  receipt  of  the  bills  of  lading, 
less  2  per  cent  discount;  or  net  cash  is  paid  ten  days  after 
receipt  of  the  shipment.  The  manufacturer  pays  freight  and 
other  expenses  incurred  in  the  delivery  of  the  goods  f.o.b. 


156  MACHINERY   OF   FOREIGN   TRADE 

The  profits  of  the  corporation  are  in  part  disposed  of  by 
paying  a  dividend  of  not  more  than  7  per  cent  on  its  capital 
stock,  after  carrying  to  reserve  any  sums  that  the  board  of 
directors  deems  proper.  Any  balance  remaining  is  divided 
am.ong  the  participating  concerns  in  proportion  to  the  amount 
of  the  sales  in  each  case.  In  prosperous  years  when  market 
prices  are  high,  a  considerable  surplus  is  available  for  distribu- 
tion ;  in  lean  years  the  reserves  may  be  drawn  upon  to  maintain 
the  regular  7  per  cent  dividend  on  the  capital  stock. 

The  Selling  Combine 

The  selling  combine  consists  of  a  number  of  competing 
organizations  operating  through  one  selling  organization  which 
may,  for  the  sake  of  expediency,  be  called  a  "selling  combine," 
thus  avoiding  the  odium  which  is  attached  to  the  term  trust 
and  which  is  at  the  same  time  a  more  exact  description  of  a 
large  combination  of  capital  and  resources. 

A  combine  on  a  vast  scale  bordering  on  monopoly  would 
hardly  be  feasible  in  export  trade  for  two  reasons:  First,  the 
VVebb-Pomerene  Law  has  its  limitations  so  long  as  the  anti- 
trust laws  continue  to  express  our  governmental  policy  towards 
combinations  in  production  and  trade  within  the  United 
States.  The  other  reason  is  that,  as  many  economists  assert, 
beyond  a  certain  point  combinations  are  not  economical  except 
in  raw  materials.  Even  at  home  the  history  of  large  combina- 
tions shows  that  they  were  effected  almost  exclusively  in  con- 
nection with  production  and  distribution  of  raw  products  and 
in  what  the  Germans  call  "heavy  industries,"  such  as  iron,  oil, 
coal,  alcohol,  sugar,  and  the  like. 

Export  trade  has  been  carried  on  in  respectable  volume  by 
many  concerns  which  were  organized  on  a  comparatively 
modest  scale;  and  it  is  most  likely  that  these  concerns  will 
continue  to  adhere  to  the  same  policy,  endeavoring  to  preserve 
their  individuality  and  independence.     Considering  all  things, 


EXPORT  COMBINATIONS  1 57 

and  not  the  least  of  them  the  policy  of  the  Federal  Trade 
Commission  to  protect  the  humblest  American  exporter  from 
unfair  dealings,  it  may  be  assumed  that  under  the  Webb- 
Pomerene  Act,  no  combines  for  export  trade  will  be  formed 
which  will  be  destructive  to  the  individual  welfare  of  the 
smaller  exporters. 

We  may  look,  however,  for  very  large  combines  in  some 
"heavy  industries,"  for  these  are  for  the  most  part  operated 
even  at  home  by  large  combinations.  We  may  also  look  for 
combines  in  many  other  industries  but  they  will  be  formed 
rather  through  joint  agreements  than  through  cleverly  central- 
ized management. 

Example  of  Selling  Combine 

Before  the  war  the  foreign  trade  of  one  American  industry 
suffered  greatly  from  the  effect  of  the  competition  of  its 
members  in  foreign  markets.  Upon  the  return  of  normal 
conditions,  it  seemed  certain  that  trade  would  be  resumed  with 
a  recurrence  of  the  former  unsatisfactory  conditions.  For- 
eign buyers,  as  formerly,  would  combine  to  present  a  united 
front  against  the  American  exporter,  and  the  playing  of  one 
against  another  would  lead  to  underbidding,  with  the  result 
that,  as  so  often  had  occurred  in  the  past,  the  combined  foreign 
buyers  would  obtain  the  product  below  a  fair  and  reasonable 
price.  Most  of  the  concerns  in  the  industry  had  suffered  so 
much  in  the  past  from  this  competition  and  were  so  fully  con- 
vinced of  the  wastes  involved  that  they  were  ready  to  co- 
operate by  forming  any  practicable  kind  of  joint  selling  or- 
ganization. 

Tentative  plans  were  first  drawn  up  which  included  the 
finding  of  a  man  who  had  made  his  mark  as  the  foreign  sales 
manager  for  one  of  the  concerns,  and  whose  integritv  and 
impartiality  were  approved  by  all.  He  was  to  be  engaged  as 
general  manager.     Desirable  locations  in  a  number  of  foreign 


158  MACHINERY  OF  FOREIGN  TRADE 

markets  were  then  to  be  secured  simply  by  taking  over  branches 
already  maintained  there  by  one  or  another  of  the  participating 
concerns.  There  was  abundant  past  experience  from  which  to 
plan  the  office  management  and  sales  organization,  to  work 
out  the  details  of  selling,  credits,  financing,  shipping,  and  traf- 
fic, and  to  draw  up  a  budget  of  probable  financial  require- 
ments for  a  joint  selling  campaign. 

Form  of  Incorporation 

A  corporation  was  finally  organized  under  the  laws  of  one 
of  the  western  states,  with  $150,000  capitalization,  entirely 
of  paid-up  common  stock,  and  its  purposes  carefully  limited  to 
those  permitted  by  the  Webb-Pomerene  Law.  Only  concerns 
which  would  agree  to  sell  their  entire  export  output  through 
the  corporation  were  eligible  to  become  stockholders ;  no  con- 
cern was  entitled  to  more  than  one  vote,  regardless  of  the  num- 
ber of  shares  it  might  own;  and  no  concern,  or  group  of  con- 
cerns, was  ever  to  obtain  a  majority  interest  or  dominating 
control. 

To  carry  out  these  provisions,  all  shares  of  stock,  excepting 
the  qualifying  shares,  were  indorsed  in  blank  by  the  stock- 
holder and  deposited  in  trust  with  the  stock  trustees.  Upon 
this  stock  the  corporation  had  a  first  lien  as  security  for  the 
faithful  observance  by  the  stockholders  of  the  corporate  by- 
laws and  resolutions  and  the  performance  of  any  agreements 
entered  into  or  obligations  incurred  with  respect  to  the  cor- 
poration. In  event  of  the  stockholder's  default  in  this  regard, 
the  board  of  directors  was  to  tender  to  the  stockholder  the 
book  value,  not  exceeding  the  par  value,  of  his  stock,  less  any 
indebtedness  owing  to  the  corporation.  The  stock  held  by  the 
defaulter  was  then  to  be  canceled  and  reissued  to  the  stock 
trustees  who  in  turn  might  sell  it  to  concerns  eligible  to  become 
stockholders. 

According  to  the  by-laws  specified  geographical  groups  of 


EXPORT  COMBINATIONS  159 

stockholders  were  always  to  be  entitled  to  a  specified  number 
of  directors  on  the  board  and  in  the  executive  committee. 
Dividends  were  limited  to  7  per  cent  per  annum,  and  surplus 
earnings  were  to  be  retained  for  reserves,  or  expended  in  sales 
promotion  in  export  trade,  according  as  the  board  of  directors 
might  determine. 

Agreements  with  Participating  Concerns 

Each  participating  concern  executed  an  agreement  with 
the  corporation,  constituting  the  latter  the  exclusive  agent  for 
the  sale  of  its  product  abroad  during  the  life  of  the  agreement. 
This  export  product  consisted  of  a  specified  quota  determined 
from  time  to  time  by  the  board  of  directors  of  the  corporation. 
The  corporation  was  to  sell  at  the  best  prices  obtainable  and 
was  to  allot  its  orders  fairly  and  impartially  among  the  partici- 
pating concerns  in  accordance  with  the  quotas  determined  from 
time  to  time  by  the  board  of  directors.  Each  participating 
concern  agreed  to  accept  and  execute  such  orders  as  the  cor- 
poration might  assign  to  it.  The  corporation  was  to  guarantee 
the  payment  of  all  open  accounts  and  to  settle  for  each  ship- 
ment within  thirty  days,  retaining  for  its  services  a  commis- 
sion of  2^  per  cent.  The  agreement  provided  for  no  rebate 
upon  this  commission,  and  the  only  refund  of  any  kind  to 
which  the  participating  concern  was  to  be  entitled  was  in  the 
form  of  dividends  upon  the  stock  owned  in  the  corporation. 

Suggested  District  Sales  Company 

Of  late,  suggestions  have  been  made  at  several  foreign 
trade  conventions  for  the  formation  of  a  district  sales  company. 
The  proposition  consists. in  subdividing  this  country  into  geo- 
graphical districts,  each  district  comprising  about  a  dozen 
towns  In  reasonable  proximity,  one  of  which  will  be  the  head- 
quarters of  the  company  which  shall  include  all  the  exporting 
concerns  within  the  district.     These  concerns  would  make, 


l6o  MACHINERY   OF   FOREIGN   TRADE 

through  the  district  export  sales  company,  a  combined  effort 
to  market  their  products  abroad,  to  secure  competent  help, 
develop  export  salesmen,  cultivate  foreign  buyers  visiting  the 
United  States,  and  provide  for  frequent  meetings  of  its  mem- 
bers. The  details  as  to  the  nature  of  the  organization,  the 
amount  of  subscriptions  for  stock,  the  method  of  carrying  on 
sales,  and  the  distribution  of  orders,  would  be  determined  in 
each  case  by  local  conditions  and  the  desires  of  the  members. 

The  idea  behind  this  plan  is  new  and  it  has  not,  at  this 
writing,  been  put  into  actual  practice.  No  doubt  sooner  or  later 
some  such  method  will  be  put  to  a  practical  test.  It  will  be 
particularly  welcome  to  the  manufacturers  who  are  a  consider- 
able distance  from  the  seaboard,  to  whom  export  activities  are 
a  novelty  and  who  are  not  producing  for  export  in  quantities 
large  enough  to  justify  their  making  export  efforts  through 
one  of  the  types  of  the  selling  organizations  already  tested  and 
found  effective. 

It  must  be  remembered,  of  course,  that  the  full  value  of 
the  Webb-Pomerene  Law  will  be  uncertain  until  some  of  its 
provisions  have  been  tested  by  the  courts.  In  the  meantime, 
however,  it  appears  to  be  a  boon  to  the  exporter — to  offer  a 
freedom  of  action  in  the  matter  of  organization  and  expansion 
which  the  exporter  has  sadly  needed  hitherto.  If  he  is  wise 
he  will  give  the  new  law  careful  study  and  ask  himself  how 
best  it  may  be  applied  to  his  type  of  selling  organization  or 
to  his  export  plans. 


CHAPTER   XX 

GOVERNMENTAL  SUPPORT  OF  FOREIGN  TRADE 

Achievement  in  Foreign  Trade 

Most  of  the  world's  trading  nations  have  taken  centuries 
to  bring  their  foreign  trade  to  a  high  state  of  development. 
For  hundreds  of  years,  England,  Holland,  France,  and  Belgium 
have  chartered  companies  with  political  powers  and  purposes 
for  the  promotion  of  trade  in  foreign  lands.  The  foreign 
trade  of  Germany  on  the  other  hand  has  been  developed  within 
twenty  years.  Despite  certain  features  which  are  unworthy 
of  commendation  or  imitation,  Germany's  rapid  expansion  in 
foreign  trade  constitutes  a  genuine  achievement.  For  America, 
it  contains  a  valuable  lesson  so  far  as  it  was  due  to  careful 
preparation,  co-operative  methods,  and  governmental  assist- 
ance. The  question  of  governmental  assistance  constitutes 
the  subject  matter  of  this  chapter. 

Germany's  foreign  trade  organization  was  centered  in 
Berlin  and  rested  on  the  Reichsbank  which  gathered  into  one 
center  of  influence  the  threads  of  the  network  of  commerce 
scattered  throughout  the  world.  To  this  center,  the  govern- 
ment lent  all  the  assistance  in  its  power,  and  to  it  the  banks, 
transportation  companies,  manufacturers,  and  every  other 
essential  factor  lent  their  effective  co-operation. 

By  means  of  this  organization  everything  that  w?.s  poten- 
tially harmful  to  commercial  expansion  vvas  eliininated  and 
all  that  was  beneficial  was  acquired.  Foreign  trade  was 
aided  by  the  German  government  in  every  possible  way  and 
the  conquest  of  foreign  markets  became  a  great  national  ideal 
and  aspiration. 

i6i 


l62  MACHINERY  OF  FOREIGN  TRADE 

Basic  American  Organization 

What  America  most  needs  to  advance  her  commercial 
expansion  is  the  estabHshment  of  a  center  of  co-ordination  of 
all  the  essential  factors  within  the  nation.  These  are  the 
manufacturers,  the  bankers,  the  transportation  interests,  and 
the  political  and  governmental  factors. 

There  is  no  one  more  vitally  interested  in  such  a  plan  from 
the  standpoint  of  self-interest  than  the  manufacturer,  and 
on  him  rests  the  burden  of  initiative.  The  manufacturing 
interests  are  just  awakening  to  their  opportunities  but  there 
is  still  much  to  be  desired  among  them  in  organization,  under- 
standing, initiative,  and  co-operation. 

The  banking  and  financial  interests  can  be  of  great  service 
in  the  extension  of  credit  facilities,  the  financing  of  exports, 
the  establishment  of  branches  in  foreign  countries,  and  in 
other  ways  essential  to  the  conquest  of  the  world's  trade. 

The  transportation  companies  can,  if  permitted  by  law, 
make  their  rates  suit  the  exigencies  of  our  foreign  trade 
expansion  and  provide  the  facilities  that  shall  help  instead 
of  hinder  our  Importing  as  well  as  our  exporting  activities. 

Perhaps  the  most  important  of  all  factors  are  the  political 
and  governmental.  Unfortunately  the  United  States  has 
no  continuous  foreign  policy  except  in  the  broadest  sense.  A 
policy  which  is  casual  and  extemporaneous  is  worse  than 
useless.  The  present  situation  is  due  largely  to  the  fact  that 
our  political  parties  have  no  definite  foreign  aim.  Onlv  when 
each  party  feels  itself  responsible  for  definite  results  will  there 
be  an  improvement  in  the  political  agencies  by  which  the 
results  are  attained.  We  cannot  even  hope  to  ameliorate 
conditions,  or  to  improve  the  administrative  and  legislative 
attitude  toward  foreign  trade,  until  the  commercial  interests 
are  sufficiently  organized  and  influential  to  make  the  extension 
of  foreign  trade  by  definite  means  a  plank  in  the  platform  of 
each  political  party. 


GOVERNMENTAL   SUPPORT  163 

Need  of  Governmental  Help  in  Foreign  Trade 

The  United  States  should  support  our  foreign  trade  not 
so  much  in  the  hope  of  duplicating  Germany's  rapid  expansion 
as  to  neutralize  certain  present  deficiencies  that  now  operate 
against  success.     These  deficiencies  are: 

1.  The  lack  of  trained  diplomats. 

2.  The  lack  of  definite  national  aims 

3.  Our  general  unpreparedness. 

Only  those  who  are  thoroughly  familiar  with  the  require- 
ments of  foreign  trade  can  fully  realize  how  much  the  diplo- 
matic service  can  aid  in  its  promotion.  Diplomacy  embodies 
in  most  countries  the  policies  of  parties,  the  desires  of  the 
people,  and  the  acts  of  the  government.  Without  a  consistent 
policy,  so  that  the  ends  to  be  served  are  definite  and  clear, 
American  diplomats  must  always  be  at  a  disadvantage.  The 
American  diplomat,  lacking  in  special  training  and  without  a 
policy  to  guide  him,  must  generally  fail  in  dealing  with  the 
skilled  representative  of  a  foreign  power  who,  in  addition  to 
his  special  eciuipment,  brings  to  his  task  the  well-laid  plans 
and  clearly  defined  policies  of  his  government. 

The  American  representative  abroad  is  as  a  rule  unable 
to  safeguard  the  industrial,  commercial,  and  financial  interests 
of  the  United  States  in  the  country  which  he  represents  because 
of  his  lack  of  a  comprehensive  grasp  of  the  conditions  of 
trade  and  policies  of  government  throughout  the  world,  and 
his  government's  failure  to  provide  him  with  a  well-defined 
policy. 

Even  with  an  adequate  governmental  representation  and 
policy  we  should  still  be  in  a  state  of  unpreparedness.  We 
do  not  yet  realize  the  Immense  benefits  of  foreign  trade  to 
the  nation  engaged  in  it  up  to  capacity.  The  vehicle  by  which 
our  country  will  become  completely  ready  is  public  opinion.  It 
is  the  dynamo  that  will  set  in  motion  all  the  separate  activities 


164  MACHINERY   OF   FOREIGN   TRADE 

toward  the  great  design  that  should  become  our  great  national 
ambition.  When  the  time  comes  the  great  problem  will  be  how 
to  mobilize  speedily  and  effectively.  Then  even  the  man  in 
the  street  will  feel  the  imperative  need  of  a  strong  central 
organization. 

Form  of  Organization 

Americans  are  generally  averse  to  direct  governmental 
control  of  private  enterprise  and  we  may  well  hesitate  to 
advocate  a  center  of  co-ordination  of  effort  in  which  the 
government  is  a  controlling  factor.  Under  the  former  German 
plan  of  organization  the  control  of  the  central  body  rested 
in  but  three  men,  the  Secretary  of  the  Treasury,  who  repre- 
sented the  government,  the  President  of  the  Reichsbank,  who 
spoke  for  the  financial  interests,  and  the  head  of  the  steamship 
combine,  who  represented  the  transportation  and  business  in- 
terests. Were  we  to  organize  a  similar  body,  the  corresponding 
officials  would  have  great  power  but  they  need  not  necessarily 
be  autocrats.  The  influence  and  power  of  the  majority  would 
come  from  the  co-operation  of  the  organized  factors  of  com- 
merce to  whom  they  would  be  responsible  and  for  whom  they 
would  act.  The  board  would  then  serve  as  an  intermediary 
between  organized  politics  and  organized  commerce  and 
become  a  veritable  balance  wheel  of  progress. 

As  has  been  pointed  out  in  Chapter  XVI,  there  are  many 
useful  organizations  which  are  performing  valuable  and  im- 
portant work  in  this  direction.  They  do  not  pretend,  however, 
to  be  able  to  mobilize  the  resources  of  the  nation  nor  to  provide 
an  immediate  means  for  a  thoroughly  aggressive  and  scien- 
tific exploitation  of  foreign  trade.  But  if  we  are  to  utilize  our 
present  opportunities  and  to  secure  our  full  share  of  the 
world's  markets,  we  shall  need  a  central  co-ordinating  body. 
In  no  other  way  can  we  truly  nationalize  American  foreign 
trade. 


GOVERNMENTAL   SUPPORT  165 

An  American  Board  of  Foreign  Trade 

The  creation  of  an  American  Board  of  Foreign  Trade 
would  furnish  and  would  hasten  our  evolution  as  world 
traders.  On  such  an  American  Board  of  Foreign  Trade 
would  sit  the  representatives  of  the  factors  mentioned  above 
who  are  directly  concerned  in  our  foreign  commerce,  viz: 
the  manufacturer,  the  banker,  the  transportation  companies, 
and  the  government.  A  fifth  member  might  be  chosen  by 
these  four. 

The  President  of  tlie  United  States  might  appoint  a 
representative  of  the  government,  the  manufacturing  and  the 
other  interests  could  each  have  a  suitable  man  appointed 
through  their  national  associations.  It  would  not  then  be  a 
self-constituted  body,  representing  only  certain  interests  and 
aiming  to  promote  only  those  purposes  that  are  agreeable  to 
those  special  interests,  but  it  would  represent  and  aim  to  pro- 
mote aU  the  interests  within  the  nation.  Only  such  an  organi- 
zation can  mobilize  all  the  resources  of  the  nation  for  our 
commercial  expansion  abroad. 

Specific  Activities  of  Board  of  Trade 

The  representative  of  the  bankers  of  the  country  could 
arrange  for  the  establishment  of  enough  American  banks 
abroad  to  afford  facilities  for  American  investments  in  foreign 
countries.  Trade  no  longer  follows  the  flag  to  such  an  extent 
as  it  follows  invested  capital  and  banking,  both  of  which 
co-operate  with  the  trader  in  his  campaign  for  business. 

The  representative  of  the  transportation  interests  could 
bring  about  a  thorough  understanding  and  continual  co-opera- 
tion in  providing  the  American  trader  with  adequate  shipping 
facilities.  He  could  mobilize  the  American-owned  merchant 
marine,  and  supervise  its  co-operation  with  the  American 
railways,  enlarging  their  service  and  providing  a  joint  rate 
for  all  foreign  shipments  from  whatever  part  of  the  country. 


l66  MACHINERY  OF  FOREIGN  TRADE 

The  representative  of  the  manufacturing  interests  would 
perhaps  have  the  hardest  task  of  all.  He  would  have  to 
establish  such  selling  facilities  abroad  as  to  afford  the  smallest 
manufacturer  an  opportunity  to  sell  his  goods  in  foreign 
markets.  At  present  only  the  largest  manufacturers  enter 
foreign  trade  under  favorable  conditions  and  even  then  they 
work  under  a  severe  handicap  and  in  the  face  of  numerous 
obstacles  which  could  easily  and  quickly  be  overcome  if  there 
were  anyone  who  had  authority  to  act  for  all.  Such  an  official 
might  devise  a  method  by  which  smaller  manufacturers,  either 
of  competing  or  non-competing  products,  could  establish  joint 
selling  agencies  abroad  on  a  co-operative  plan  and  thus  he 
might  become  an  effective  means  of  organizing  co-operation 
amongst  other  manufacturers. 

The  representative  of  the  government  would  serve  as  a 
necessary  link  between  the  commercial  organizations  on  the 
one  hand  and  the  governmental  support  on  the  other,  securing 
the  perfect  co-ordination  of  the  two  and  promoting  the 
adjustment  of  legislative  acts,  public  policies,  and  diplomatic 
service  to  the  highest  requirements  of  foreign  trade. 

Importance  of  Proper  Organization 

It  Is  most  essential  that  such  an  Institution  should  contain 
the  representation  that  has  been  suggested.  Unless  it  were  so 
constructed  and  had  the  backing  of  great  Interests  directly 
concerned  with  foreign  trade.  It  would  not  be  able  to  accom- 
plish the  desired  results  since  It  would  not  have  the  necessary 
authority  to  speak  for  the  great  interests,  nor  would  It  have 
the  financial  support  required  to  engineer  a  movement  on  such 
a  vast  scale.  If,  however,  It  Is  constituted  as  outlined  above, 
it  can  enlist  the  entire  time  and  services  of  the  men  capable 
of  administering  such  an  organization.  It  is  useless  to  try  to 
work  out  the  solution  of  the  problem  in  the  manner  here 
advocated  by  means  of  the  usual  methods  employed  by  the 


GOVERNMENTAL   SUPPORT  167 

forms  of  trade  organization  considered  in  the  discussion  of 
foreign  trade  auxiliaries  (Chapters  XIV,  XVI).  The  calibre 
of  the  men  required  by  such  an  institution  would  be  similar 
at  least  to  that  of  the  men  who  constitute  the  Federal  Reserve 
Board. 

General  Functions  oi  the  Board 

The  board  advocated  could  in  a  measure  supplement  the 
activities  of  our  Department  of  Commerce  in  so  far  as  it 
concerns  itself  with  foreign  trade,  but  its  primary  function 
should  be  to  mobilize  the  resources  of  the  nation  in  behalf  of 
the  extension  of  our  foreign  trade.  This  it  would  do,  not  so 
much  through  the  collection  and  dissemination  of  useful 
information,  as  by  acting  as  the  center  into  which  all  the  lines 
of  our  national  endeavor  in  the  direction  of  foreign  trade 
would  converge,  and  which  would  not  only  promote  the 
necessary  activities,  but  also  devise  a  means  therefor,  and  in 
a  measure  supervise  their  execution  throughout  the  world. 
Its  usefulness  would  also  be  great  in  the  formation  of  public 
opinion  and  its  proper  direction  towards  the  creation  of  a 
nation-wide  enthusiasm  for  foreign  trade.  Such  a  body  could 
enlist  the  proper  attitude  of  Congress,  as  our  commercial 
expansion  abroad  should  receive  the  favorable  support  of 
everyone. 

Again  it  may  be  emphasized  that  in  order  to  fulfil  its  pur- 
pose such  a  board  must  be  a  body  representing  all  the  great 
interests  directly  concerned  in  foreign  trade,  and  be  guided 
and  administered  by  men  of  experience,  prestige,  and  ability. 

Such  a  board  of  trade  could  engineer  the  project  of  main- 
taining national  selling  agencies  abroad  by  means  of  exhibits 
of  our  products  and  of  sample  distributions  in  all  the  great 
trade  centers  of  the  world.  It  could  also  operate  an  effective 
trade  intelligence  bureau.  Through  its  commissioners  in 
foreign   countries   it   could   supplement   our   diplomatic   and 


l68  MACHINERY    OF    FOREIGN    TRADE 

consular  service  with  a  highly  trained  staff  of  experts  in 
foreign  trade  through  whom  an  intelligent  and  forceful 
co-operation  with  our  foreign  service  in  every  part  of  the 
globe  would  be  assured.  It  might  even,  through  its  depart- 
ments or  branches,  undertake  to  conduct  commercial  negotia- 
tions and  even  to  make  sales  of  American  goods  abroad. 

Certainly,  an  institution  of  this  sort  would  be  a  powerful 
stimulus  to  our  foreign  trade,  co-ordinating  various  activities 
now  working  in  that  direction  and  presenting  a  strong, 
aggressive,  intelligent,  and  organized  front  wherever  the 
interests  of  our  international  commerce  demand  it. 

There  would  seem  to  be  no  other  way  in  which  the 
resources  of  our  nation  could  be  so  quickly  mobilized  for  scien- 
tific foreign  trade  expansion,  although  a  central  co-ordinating 
body  might,  of  course,  be  established  by  some  other  means  or 
be  called  by  some  other  name. 


PART    III 

OPERATING  A  FOREIGN  TRADE 
ORGANIZATION 


CHAPTER   XXI 

THE  DEVELOPMENT  OF  A  FOREIGN  MARKET 

Attitude  Toward  the  Foreign  Field 

The  United  States  is  a  most  progressive  country.  In  less 
than  a  century  it  has  accompHshed  more  in  the  way  of  inven- 
tion, finance,  and  general  commercial  progress  than  any 
country  of  the  old  world  in  twice  that  length  of  time.  Since 
the  war  has  seriously  crippled  the  other  great  nations  and 
impaired  their  leadership  in  the  world's  progress,  it  falls  to 
our  lot  to  place  our  unimpaired  resources  at  the  world's  service 
and  to  take  the  lead  in  continuing  the  world's  progress  and 
in  preserving  its  commercial  and  financial  balance.  The 
expenditure  of  even  a  part  of  the  business  energy  that  we 
have  shown  at  home  can  accomplish  these  results  abroad,  if 
our  efforts  are  properly  directed.  We  can  aid  in  revolution- 
izing methods  now  in  vogue  and  in  the  setting  of  new  stand- 
ards and  the  raising  of  new  ideals  in  commerce. 

The  first  step  is  to  cease  to  consider  our  country  as  the 
only  possible  field  for  business  operaticns  and  to  begin  to  think 
of  the  whole  world  as  our  market.  Nor  must  we  be  content 
with  selling  our  goods  abroad.  We  should  extend  our  busi- 
ness operations  in  foreign  countries  to  investments,  banking, 
and  the  constructive  development  of  natural  resources.  If  we 
wish  to  develop  extensive  markets  abroad  for  our  manufac- 
turers we  must  use  our  surplus  funds  to  help  develop  the  re- 
sources of  the  countries  with  which  we  are  dealing.  We  must 
go  even  further — we  must  not  only  act  as  bankers  but  we  must 
aid  in  the  industrial  developments  in  foreign  countries  as  we 
have  done  at  home. 

171 


\'J2 


OPERATING   THE   ORGANIZATION 


Our  men  of  brains  and  initiative  must  build  railways,  de- 
velop mines,  and  with  the  introduction  of  newer  and  better 
machinery  and  implements  improve  the  agricultural  methods 
of  foreign  countries.  Railway  construction  will  keep  our  fac- 
tories busy  in  manufacturing  locomotives,  cars,  and  tracks, 
and  the  other  developments  will  give  us  employment  in  sup- 
plying tools,  machinery,  and  other  finished  products.  The 
building  of  a  railway  opens  the  surrounding  country,  and 
creates  new  fields  in  which  our  salesmen  may  sell  their  goods. 

The  stability  of  our  manufacturing  interests  can  be  at- 
tained only  by  creating  the  widest  possible  market  for  our 
products.  In  investing  our  surplus  funds  in  the  developments 
of  foreign  countries,  we  encourage  the  countries  thus  bene- 
fited to  favor  us  with  their  trade  and  to  prefer  us  in  various 
other  ways. 

Not  only  should  our  bankers  and  the  public  be  educated 
to  appreciate  the  advantage  accruing  to  us  as  a  nation  through 
the  extension  of  short-  and  long-term  loans  to  foreign  gov- 
ernments and  corporations,  but  the  business  man  should  be 
taught  to  realize  that  in  many  instances  the  expansion  of  his 
export  trade  may  be  greatly  facilitated  by  creating  extensive 
local  channels  of  distribution.  Thus  for  example,  in  some 
instances  a  manufacturer  will  find  it  to  his  advantage  to  estab- 
lish retail  stores  in  the  country  which  offers  special  oppor- 
tunities for  his  product.  Again,  it  may  be  advisable  to  estab- 
lish distribution  centers  necessitating  in  some  cases  the  build- 
ing of  warehouses  and  of  assembling  plants. 

Developing  a  Foreign  Market 

The  first  steps  in  developing  a  foreign  market  will  be  iden- 
tical with  those  employed  in  the  expansion  of  any  business. 
Next  we  must  cease  to  rely  entirely  on  the  middleman  or  even 
on  the  local  importer  and  seek  mainly,  strongly,  persistently, 
and  intelligently  the  ultimate  consumer  in  foreign  countries. 


DEVELOPING   A   FOREIGN   MARKET  173 

To  accomplish  this  necessitates  wise  planning,  sufficient  capi- 
tal, and  the  nucleus  of  an  organization. 

The  first  field  of  operation  must  then  be  decided  upon  and 
where  the  interests  are  large  enough  to  justify  the  expense, 
a  competent  man  be  sent  to  investigate  and  to  pave  the  way. 
To  select  such  man  is  no  easy  task.  What  sort  of  man  must 
he  be? 

The  Investigator 

The  man  who  will  be  successful  on  a  business  mission  of 
the  sort  under  discussion  must  be  a  man  of  parts.  It  would  be 
very  desirable  if  su«ch  a  man  had  been  abroad  on  former  occa- 
sions and  had  had  experience  in  meeting  foreigners  even  if 
only  in  a  social  way  and  casually.  A  college  education  may 
help  but  it  does  not  necessarily  fit  a  man  for  such  a  position. 

It  is  a  difficult  thing  to  find  properly  qualified  men  for  such 
a  task.  The  matter  would  be  greatly  facilitated  if  the  govern- 
ment— say  the  Department  of  Commerce — were  to  keep  a 
record  of  the  men  available  for  this  purpose  and  supply  in- 
formation concerning  them,  so  that  a  manufacturer  could 
readily  obtain  such  assistance  when  needed. 

Sometimes  it  is  easier  to  find  a  suitable  man  than  to  pro- 
vide for  his  remuneration  and  expense.  Good  men  command 
good  pay,  and  a  worthy  business  mission  should  be  properly 
staged.  For  these  reasons  the  expense  is  usually  considerable 
and  this  explains  why  many  firms,  though  ambitious  for  for- 
eign trade,  do  not  enter  the  field. 

Investigation  Procedure 

To  consider  the  course  to  be  pursued  by  the  commercial 
investigator  will  aid  in  obtaining  some  idea  of  his  expenses. 

In  a  country  where  class  distinctions  are  strong  and  where 
the  people  are  thoroughly  influenced  by  external  appearances, 
it  is  a  good  policy,  in  some  lines  of  business,  for  the  commer- 


174  OPERATING   THE   ORGANIZATION 

cial  investigator  to  have  a  private  secretary  who  is  best  a 
native.  The  secretary  would  answer  telephone  calls,  write 
letters,  secure  appointments,  call  on  officials  and  merchants  for 
the  purpose  of  making  business  engagements  or  extending  invi- 
tations on  behalf  of  his  principal,  and  otherwise  help  him  to 
maintain  a  dignified  and  proper  position. 

Letters  of  Introduction 

The  investigator's  letters  of  introduction  should  be  mailed 
to  reach  their  destination  a  few  days  before  he  calls  in  person. 
Too  much  value  should  not  be  attributed  to  the  stereotyped 
introductions  from  governmental  sources,  unless  they  are  of  a 
personal  nature.  As  a  rule  the  United  States  representatives 
abroad  do  not  pay  any  particular  attention  to  such  letters. 

A  stereotyped  copy  of  the  letter  issued  by  the  Secretary  of 
State  when  solicited  through  proper  channels  is  here  given: 

Department  of  State 
United  States  of  America 
To  The  Diplomatic  and  Consular  Officers 
of  the  United  States. 

Gentlemen : 

At  the  instance  of  the  Honorable  Mr.  X.,  a  representative  of 

the   United   States   from   the   State   of    ,   I   take   pleasure   in 

introducing  to  you  Mr.  Y.  of ,  who  is  about  to  proceed  abroad. 

I  cordially  bespeak  for  him  such  courtesies  and  assistance  as  you 
may  be  able  to  render  consistently  with  your  official  duties. 

I  am,  gentlemen, 

Your  obedient  servant, 

John  Doe, 

Secretary  of  State. 

Such  letters,  however  valuable  they  may  be  as  a  means  of 
identification,  should  not  be  overestimated  as  an  aid  to  getting 
business.    Their  practical  commercial  value  is  very  doubtful. 

Personal  letters  from  Congressmen  and  officials  to  consuls 
and  ambassadors  are  of  more  value,  particularly  if  such  ofifi- 


DEVELOPING   A   FOREIGN   MARKET  175 

cials  are  personally  acquainted  with  the  foreign  representative 
to  whom  they  address  the  introduction. 

Letters  of  introduction  from  banks  are,  as  a  rule,  of  little 
value  except  as  a  means  of  identification  and  in  securing  bank- 
ing courtesies. 

The  best  of  all  are  personal  letters  from  friends,  relatives, 
or  business  associates  at  home  to  those  abroad. 

Deportment 

It  should  always  be  remembered  that  the  commercial  rep- 
resentative, particularly  if  he  is  of  the  competent  type  described 
above,  will  meet  with  a  great  deal  of  courtesy  abroad,  espe- 
cially from  bankers  and  business  men.  He  will  receive  much 
more  consideration  there  than  he  will  in  America,  and  he 
should  be  capable  of  turning  it  to  good  account  by  making  the 
most  of  his  many  opportunities. 

Manners  and  politeness  count  for  more  in  foreign  coun- 
tries than  external  appearances  or  the  display  of  wealth.  One 
must  never  be  insistent  or  pressing  if  one  wishes  to  enter  into 
satisfactory  business  relations  with  foreigners.  They  are  apt 
to  construe  insistence  as  rudeness.  If  the  representative 
is  tactful,  however,  and  if  he  will  proceed  in  the  manner  per- 
mitted by  the  customs  of  the  country,  he  can  get  what  he  wants 
at  the  proper  time  and  place. 

In  some  countries  the  representative  may  be  lavishly  enter- 
tained. However  strong  the  salesman's  inclinations  he  must 
remember  that  abroad  it  is  considered  rude  to  "treat"  a  person 
while  you  are  a  guest.  The  usual  thing  is  to  accept  all  the 
courtesies  that  are  offered,  without  any  effort  to  reciprocate ; 
but  within  a  certain  time  the  host  should  be  made  the  guest. 

The  entertainment  of  a  person  on  a  business  mission  still 
prevails  extensively  abroad,  and  the  commercial  diplomat 
should  inform  himself  on  his  arrival  in  the  country  as  to  the 
custom  and  etiquette  upon  this  point. 


176  OPERATING   THE   ORGANIZATION 

Although  ill  most  foreign  countries  display  of  any  kind 
is  considered  bad  form,  there  are  exceptions  to  the  rule.  In 
Russia,  before  the  revolution,  some  large  transactions  were 
negotiated  and  important  contracts  closed  as  a  result  of  lavish 
entertainment. 

Obtaining  Data 

The  first  thing  for  the  investigator  is  to  obtain  all  avail- 
able data  bearing  on  his  business  and  to  verify  such  data 
as  have  already  been  obtained  at  home,  so  that  a  chart  can 
readily  be  prepared  which  will  be  scientifically  correct.  The 
next  thing  is  to  ascertain  the  names  of  the  managers  of  all 
the  principal  houses  dealing  in  the  products  in  which  he  is  in- 
terested. He  should  then  make  appointments  to  see  them. 
Sometimes  the  merchant  can  even  be  brought  to  call  on  the 
representative,  instead  of  the  latter  calling  on  the  merchant. 

As  a  rule,  more  data  of  a  general  character  can  be  learned 
from  the  tradespeople  than  from  all  other  sources  combined. 
The  representative  must  use  his  judgment  as  to  how  to  abstract 
such  information,  but  he  should  have  the  qualifications  that 
will  assure  his  obtaining  it.  He  may  also  endeavor  to  estab- 
lish business  wherever  convenient,  but  this  task  should  be 
deferred  until  all  the  data  have  been  secured  and  the  trade 
diplomat  has  become  convinced  that  the  opportunity  is  there 
and  the  market  is  ready  for  his  product. 

It  is  always  well  to  remember  that  hurry  is  not  a  part  of 
the  foreigner's  scheme  of  life.  On  the  contrary  it  is  rather 
distasteful  to  him  and  therefore  is  to  be  avoided.  In  many 
countries  all  business  life  moves  slowly,  but  once  trade  is  estab- 
lished, it  is  usually  firm  and  steady. 

All  the  preliminary  study  of  the  foreign  market  should  be 
directed  towards  the  end  of  procuring  the  necessary  data  for 
the  preparation  of  the  charts  shown  in  Appendix  D.  Once 
the  chart  is  available,  the  business  strategist  or  the  strategic 


DEVELOPING   A   FOREIGN   MARKET  177 

board  is  ready  to  decide  whether  the  particular  field  is  worth 
cultivating.  Thereafter  the  chart  will  serve  as  the  basis  for  the 
preparation  of  the  selling  plan  and  the  selling  campaign.  With 
the  completion  of  the  chart  of  the  market  the  representative's 
mission  is  ended.  He  should,  however,  be  freely  consulted  by 
those  who  are  to  decide  upon  sales  plans. 

Time 

The  time  required  for  an  investigation  will  vary  with  the 
country  to  be  exploited  and  the  nature  of  the  goods  to  be  sold. 
In  any  event  the  investigator  should  have  at  least  three  weeks 
in  which  to  secure  the  necessary  first-hand  information.  If 
he  is  to  form  connections  or  to  make  sales,  or  both,  the  length 
of  his  stay  should  be  correspondingly  longer. 

As  a  general  rule,  if  a  man  is  to  go  abroad  to  secure  in- 
formation and  to  form  trade  connections,  or  even  to  try  to 
make  introductory  sales,  his  stay  should  be  at  least  six  weeks. 

Expense  of  an  Investigator  or  a  Sales  Representative 

It  is  a  fair  estimate  that  not  less  than  $600  per  month 
should  be  provided  for  the  expenses  of  the  investigator.  Hotel 
bills  and  transportation  will  be  but  a  part  of  the  necessary 
expenses.  Not  infrequently  he  is  obliged  to  entertain.  In 
many  countries  a  social  basis  must  first  be  established  between 
the  buyer  and  the  seller  and  this  involves  expenditures  for 
dinners,  suppers,  theater  parties,  etc.  Almost  invariably  the 
representative  must  solicit  help  from  foreign  government  offi- 
cials. United  States  consuls,  and  officials  of  trade  organiza- 
tions, asking  for  information  or  introductions.  He  can 
acknowledge  these  favors  by  entertainment  of  one  kind  or 
another.  Very  often  he  must  actually  pay  for  the  aid  rendered, 
either  through  the  employment  of  some  intermediary  or  by 
employing  assistants  in  each  case. 

Six  hundred  dollars  will  not  go  very  far  as  a  usual  thing, 


178  OPERATING   THE   ORGANIZATION 

even  under  normal  conditions  and  in  a  country  where  normal 
prices  prevail,  as  will  readily  be  seen  from  the  following  typi- 
cal items: 

Room  in  a  first-class  hotel  ($4-$5  per  day) $I20-$I50 

Meals,  carfares,  and  small  miscellaneous  items 

($8-$io  per  day) 240-  300 

Cables  home  5° 

Entertainments 150 

Secretarial  expense 100 

Or  a  total  of  $66o-$75o  per  month. 

Export  Office 

Next  to  consider  is  the  question  of  an  export  office.  On 
this  subject  a  great  deal  has  been  said  and  written.  Some 
advocate  that  an  export  office  should  be  established  in  New 
York.  Others  are  satisfied  to  have  it  at  the  factory.  Some 
insist  on  a  separate  and  distinct  export  organization — others 
advise  half-way  measures.  It  does  not  really  matter  where  the 
export  office  is  located.  At  the  outset  the  exporter  should  re- 
gard his  foreign  trade  merely  as  an  extension  of  his  business 
and  as  much  a  part  of  the  whole  undertaking  as  a  concern 
located  in  Rhode  Island  regards  its  trade  with  California.  A 
Rhode  Island  concern  undertaking  to  develop  a  national  busi- 
ness will  not  at  the  outset  establish  an  office  in  New  York,  nor 
necessarily  create  a  separate  organization.  It  will  proceed  to 
do  business  with  California  precisely  as  it  does  business  in 
Connecticut  and  other  near-by  states.  It  will  simply  add  suffi- 
ciently to  its  forces  and  to  its  resources  to  provide  for  the 
extension  of  its  business.  Exactly  the  same  course  should  be 
pursued  when  foreign  trade  is  contemplated. 

In  export  trade  there  are,  of  course,  intricacies  not  met 
with  in  domestic  trade,  but  to  overcome  these  one  need  not 
add  more  intricacies  and  thereby  complicate  the  situation.  If 
foreign  trade  problems  are  treated  as  domestic  trade  problems 
are  treated,  all  will  come  right  in  the  end. 


DEVELOPING   A   FOREIGN   MARKET  179 

Organizations  to  handle  exports  will  differ  according  to 
the  export  policies  in  each  case.  If  the  house  proposes  to  con- 
duct a  vigorous  mail  campaign  with  foreign  countries  and  to 
deal  largely  with  export  merchants  instead  of  engaging  in 
direct  trade,  a  separate  office  located  preferably  in  New  York 
would  be  advisable.  If,  on  the  other  hand,  the  concern  pro- 
poses to  employ  travelers  or  to  establish  branch  offices  abroad, 
it  makes  little  difference  where  the  office  is  located  and  it 
might  be  a  distinct  advantage  to  have  the  export  department 
located  at  the  factory. 

Expenses  and  Returns 

In  an  estimation  of  what  it  will  cost  to  establish  a  for- 
eign trade  and  how  long  it  will  be  before  the  money  thus 
invested  will  come  back,  it  must  be  remembered  that  the  devel- 
opment of  foreign  trade  is  a  slow  process.  Those  who  would 
be  successful  in  their  overseas  commercial  expansion  must  be 
willing  to  wait  for  the  seed  to  grow  up.  Overseas  trade  must 
be  patiently  and  constantly  cultivated.  If  the  goods  are  of 
the  proper  quality  and  the  foreign  connections  are  intelli- 
gently made  and  judiciously  kept,  one  can  rest  assured  that  the 
business  will  pay  handsomely  in  the  end. 

As  already  stated,  a  concern  which  is  not  prepared  to  ex- 
pend a  reasonable  amount  on  preliminary  work  in  establishing 
its  trade  abroad  should  keep  out  of  the  field.  It  should  not 
even  contemplate  a  serious  foreign  trade  propaganda.  Should 
the  project,  however,  be  attempted,  it  is  sometimes  pos- 
sible to  develop  two  and  even  three  near-by  countries  with 
but  little  more  expense  than  the  cost  of  developing  one. 

Ordinarily  a  year  should  be  allowed  before  the  money 
invested  in  a  foreign  enterprise  is  expected  to  begin  to  show 
appreciable  results  or  before  the  business  can  be  considered 
to  be  upon  a  paying  basis. 

It  is  not  a  good  policy  to  expect  large  profits  during  the 


l8o  OPERATING   THE   ORGANIZATION 

time  the  concern  is  establishing  itself  in  a  particular  market 
or  unduly  to  push  its  activities  in  order  the  quicker  to  realize 
financial  benefits.  To  pursue  such  a  course  would  be  to  run 
the  risk  of  endangering  the  stablity  and  permanence  of  the 
whole  undertaking. 

Co-operation 

Oftentimes  it  is  just  as  easy  to  secure  information  for  a 
dozen  concerns  in  the  same  line  as  for  one  concern;  hence 
it  would  often  be  economy  if  a  number  of  manufacturers, 
particularly  non-competing  producers  in  the  same  line,  would 
combine  and  send  a  first-class  man  on  a  joint  investigating 
mission.  They  could  then  be  properly  represented,  and  at 
the  same  time  the  individual  expense  would  be  comparatively 
small. 

But  whatever  else  is  omitted,  no  one  who  intends  to  ven- 
ture into  a  foreign  field  on  a  fairly  large  scale  should  dispense 
with  the  proper  reconnoitering  of  the  field  for  his  proposed 
venture.    Such  survey  saves  in  the  end  both  time  and  money. 

Self-Developing  Foreign  Trade 

Of  course,  what  has  been  said  as  to  expenses  and  the  in- 
advisability  of  launching  into  foreign  trade  without  an  ex- 
tended and  costly  preliminary  investigation  does  not  apply  to 
the  smaller  concern  which  sells  abroad  as  opportunity  offers 
through  exporters,  or  foreign  dealers,  or  by  mail  order  adver- 
tising. Such  a  venture  requires  no  investigation  and  usually 
but  little  preliminary  work  or  expense  of  any  kind.  On  the 
other  hand,  when  such  a  concern  is  ready  to  go  into  foreign 
trade  on  a  larger  scale,  the  experience  gained  will  frequently 
supplement  or  take  the  place  of  the  investigation  usually 
deemed  advisable  and  thus  greatly  reduce  the  cost  of  the  more 
ambitious  undertaking. 


CHAPTER   XXII 

PREPARING  A  FOREIGN  SALES  PLAN 

The  Sales  Plan 

The  term  "selling  plan"  is  today  applied  to  the  general 
marketing  scheme  which  includes  the  work  to  be  done  by 
salesmen  and  sales  managers,  the  plan  of  advertising,  and  the 
basic  selling  appeals  on  which  the  attempt  is  to  be  made  to 
get  business  for  a  specific  product.  It  includes  the  size  and 
kind  of  packages  in  which  the  product  is  to  be  marketed,  the 
schedule  of  selling  prices  to  the  wholesaler,  the  retailer,  and 
the  ultimate  consumer,  the  nature  of  the  label,  the  guarantee, 
if  any,  and  all  the  so-called  "selling  points." 

Preparation  of  the  plan  of  sales  or  the  general  marketing 
scheme  is  one  of  the  most  important  matters  of  foreign  trade 
strategy. 

In  each  problem  of  distribution  there  are  distinctive 
features,  and  every  master  of  strategy  must  formulate  the 
rules  which  are  best  applicable  to  the  matter  in  hand.  But 
there  are  general  rules  to  be  borne  in  mind  in  every  instance 
and  these  may  here  be  sketched. 

The  same  order  and  thoroughness  which  guide  military 
operations  should  prevail  in  every  well-ordered  commercial 
undertaking.  This  statement  applies  with  peculiar  force  to 
the  preparation  of  selling  plans.  The  general  staff  of  an  army 
reduces  all  its  plans  to  records  which  are  carefully  preserved. 
These  are  changed  as  the  march  of  events  changes  the  condi- 
tions and  makes  the  old  plans  useless.  A  careful  sales  man- 
ager can  make  no  mistake  in  employing  similar  methods. 

There  is  certainly  a  place  for  the  strategist  in  the  formu- 

i8i 


i82  OPERATING   THE   ORGANIZATION 

lation  of  a  plan  to  capture  a  new  market.  The  first  step  in 
the  building  of  a  sales  plan  is  usually  to  analyze  the  forces  of 
the  enemy,  represented  by  the  established  competition  which 
it  will  be  necessary  to  overcome  in  order  to  market  the  product 
or  merchandise  to  be  offered  for  sale. 

Information  Required 

The  first  principle  to  be  observed  in  the  preparation  of  the 
plan  of  sales  is,  as  has  already  been  pointed  out,  the  securing 
of  accurate  and  complete  information  and  recording  it.  If 
the  information  is  incomplete  or,  worse  still,  is  inaccurate,  the 
plans  will  be  defective,  for,  obviously,  one  cannot  build 
right  conclusions  on  wrong  premises.  The  word  "informa- 
tion" is  here  used  in  a  broad  sense  including  all  the  knowledge 
necessary  to  qualify  one  as  a  strategist  able  to  arrange  a  sell- 
ing plan  for  a  particular  line  of  product.  Such  information 
is  as  varied  as  it  is  extensive.  It  includes  the  study  of  the 
market  in  the  foreign  country  under  investigation,  its  supply 
and  demand,  the  general  conditions — political,  social,  and 
economic — the  psychology  of  its  people,  the  methods  of  sale 
and  of  distribution,  facilities  of  transportation,  advertising 
mediums,  tariffs  and  laws  bearing  on  the  problem,  costs,  and 
so  on. 

In  planning  to  market  an  American  product  in  a  foreign 
field,  the  first  step  must  be  an  analysis  of  the  complete  data 
bearing  on  the  distribution  of  the  same  or  similar  articles  in 
the  field  to  be  undertaken.     These  data  would  include: 

1.  The  character,   or  quality,  and  the  quantity  of  the 

article  sold. 

2.  The  prices  which  are  being  obtained  from  the  con- 

sumer, the  retailer,  the  wholesaler,  and  the  im- 
porter, if  these  middlemen  are  used,  and,  in  any 
case,  full  information  as  to  the  methods  of  distribu- 
tion. 


PREPARING   A    FOREIGN    SALES    PLAN  183 

3.  The  sales  organization  and  personnel  used  by  existing 

competitors  to  extend  and  maintain  their  business. 

4.  The  advertising  methods  followed  by  competitors  in 

distributing  such  goods. 

5.  The  habits  and  prejudices  to  be  overcome  in  the  suc- 

cessful marketing  of  the  new  product  or  the  profit- 
able exploitation  of  a  new  field  with  an  old  product. 

6.  A    careful    estimation    of    the    comparative    cost    of 

the  merchandise,  of  the  probable  marketing  expense, 
and  of  the  investment  apparently  necessary  for  the 
establishment  of  a  profitable  business  with  the  mer- 
chandise to  be  sold,  considered  with  relation  to  the 
possible  profits  from  the  market  as  a  whole  and  the 
likelihood  of  retaining  the  market,  once  secured. 

Correlation  of  Selling  Plan  and  Selling  Organization 

The  second  principle  to  be  borne  in  mind  is  to  fit  the  plan 
of  sales  to  the  selling  organization  and  the  selling  organiza- 
tion to  the  plan.  An  executive  may  conceive  a  very  brilliant 
and  feasible  plan  of  campaign  for  the  conquest  of  some  foreign 
market.  But  he  cannot  execute  the  plan  unless  he  has  an 
organization  for  selling  competent  to  carry  it  out. 

It  may  happen  the  trader  fails  on  both  counts,  as  where 
he  is  carried  away  by  the  idea,  not  justified  by  investiga- 
tion, that  what  he  has  to  offer  is  superior  to  any  similar 
product  in  the  world.  With  this  conviction  he  starts  to  carry 
out  in  foreign  lands  the  most  ambitious  projects  with  a  staff 
of  assistants  who,  although  thoroughly  fitted  for  domestic 
business,  are  thoroughly  unfitted  and  untrained  for  foreign 
business,  with  the  result  that  his  plans  come  to  grief. 

Elasticity  of  Selling  Plan 

The  next  principle  is:  Other  things  being  equal,  that 
plan  is  the  best  which  has  the  greatest  elasticity. 


l84  OPERATING   THE    ORGANIZATION 

Elasticity  does  not  mean  indefiniteness  or  uncertainty. 
Tliese  are  fatal  to  any  project.  It  means  adaptability  and 
flexibility.  Conditions  may  change  cjuickly  and  new  circum- 
stances arise  which  demand  realignments.  An  unforeseen 
factor  coming  into  play  may  at  once  necessitate  a  change  in 
the  direction  or  in  the  mode  of  operation.  The  plan  must 
be  so  drawn  that  small  alterations  will  not  destroy  the  integrity 
of  the  whole. 

Some  people  conceive  the  idea  of  promoting  their  sales 
through  a  novel  way  of  advertising  or  by  some  original  means 
of  creating  an  artificial  demand  which  they  attempt  to  substi- 
tute for  a  selling  plan.  It  is  merely  a  method — a  part  of  a 
plan.  If  one  conducts  his  affairs  by  relying  on  one  or  on  a 
number  of  such  "plans"  his  business  will  depend  on  casual 
inspirations  and  extemporaneous,  oftentimes  inconsistent, 
policies  and  it  will  lack  continuity  of  action,  permanency, 
stability,  and  certainty  of  execution. 

The  plan  of  sales  for  any  serious  undertaking  on  a  large 
scale  should  be  comprehensive  enough  to  include  the  funda- 
mental policies  of  the  concern  and  to  provide  a  general  plan 
of  action  including  at  least  several  special  plans  for  extra- 
ordinary efforts  to  be  made  in  one  or  more  directions.  Thus, 
the  kind  of  publicity  to  be  employed,  the  method  or  manner  of 
selling  to  the  trade,  the  number  of  salesmen  to  be  employed, 
whether  or  not  the  concern  should  establish  its  office  in  certain 
countries,  the  amounts  of  money  to  be  appropriated  for 
different  purposes,  the  expected  volume  of  sales,  and  similar 
matters  belong  to  the  general  plan. 

Special  Selling  Plans 

A  special  plan  is  concerned  rather  with  the  details  of  execu- 
tion when  extraordinary  efforts  are  to  be  made.  If  a  com- 
pany engaged  in  foreign  trade  aims,  for  instance,  to  secure 
a  joint  selling  agency,  by  co-operating  with  non-competitive 


PREPARING  A   FOREIGN    SALES   PLAN  185 

producers,  or  to  form  a  combine  to  control  prices,  such  matters 
properly  belong  to  a  special  plan  which,  while  a  part  of  the 
general  plan,  is  fairly  complete  in  itself  and  might  be  dropped 
or  changed  without  seriously  affecting  the  general  plan. 

The  whole  plan  of  sales  should  be  definite  and  certain.  It 
should  contain  the  statement  of  the  ends  to  be  attained,  and 
the  practical  means  of  realizing  these  ends.  These  means 
must  be  sufficiently  flexible  to  adjust  themselves  to  the  ever- 
fluctuating  conditions. 

The  foreign  trade  strategist  must  bear  clearly  in  mind 
that  in  pursuing  an  immediate  end,  remote  contingencies  must 
never  be  left  out  of  account.  Many  a  time  the  tide  of  victory 
has  been  turned  by  some  such  unexpected  occurrence. 

Local  Sources  of  Information 

One  exceedingly  important  item  that  is  usually  omitted 
from  the  sales  plan  is  a  provision  for  the  continuous  flow  of 
information  regarding  trade  conditions  in  a  particular  foreign 
country. 

It  is  the  province  of  trade  diplomacy  to  keep  an  eye  on 
everything  that  transpires  which  may  be  of  interest  to  the 
country  which  the  diplomat  represents  and  to  transmit  it  to 
the  executive  who  is  responsible  for  the  selling  plans.  This 
executive  must  know  every  detail  of  what  is  occurring  in  the 
country  in  which  he  conducts  his  selling  campaigns,  for  some- 
times a  bit  of  information  may  indicate  timely  changes  to  be 
made  in  his  plan  of  sales.  Amongst  the  most  important 
things  on  which  he  should  always  be  kept  posted  are  the 
activities  of  his  competitors. 

Concentration 

The  principle  of  concentration  has  a  wide  range  in  foreign 
trade.  A  common  offence  against  this  principle  is  the  use  of 
too  many  mediums  at  the  same  time  without  special  effort 


l86  OPERATING   THE   ORGANIZATION 

in  any  one  direction.  Some  manufacturer  gets  an  idea  that 
he  should  try  to  reach  out  for  a  distant  overseas  market.  He 
then  starts  to  experiment;  he  tries  this  and  he  tries  that — 
not  seriously,  it  is  true,  but  strenuously  enough  to  find  at  the 
end  of  the  year  that  he  has  expended  much  valuable  time  with- 
out anything  definite  to  show  for  it  except  an  expense  account, 
some  little  knowledge,  and  his  experience.  Such  wastage  is 
nearly  always  due  to  the  fact  that  there  has  been  no  definite 
trade  strategy  formulated  and  to  the  consequent  absence  of 
any  firm  policy  or  rational  plan  of  campaign. 

Certainty  of  action  cannot  exist  without  a  well-defined 
policy  and  plan.  A  writer  of  fiction  may  succeed  by  depending 
on  the  inspirations  of  the  moment,  but  a  business  undertaking 
calls  for  systematic  action,  based  upon  preconceived  ideas, 
which,  to  be  of  permanent  value,  must  be  woven  into  a  system, 
reduced  to  writing,  and  placed  on  record  for  reference  at  all 
times.     Foreign  business  is  no  exception  to  this  rule. 

Follow-Up  Methods 

The  follow-up  plan  to  be  used  while  salesmen  are  can- 
vassing foreign  territory  should  be  more  elaborate  than  the 
domestic  follow-up  plan.  The  salesman's  call  should  usually 
be  preceded  by  a  preliminary  communication  from  the  house 
to  the  desirable  trade  abroad,  announcing  the  prospective  visit 
of  the  representative  and  sending  such  literature  and  sugges- 
tions as  may  create  an  interest  on  the  part  of  prospective 
foreign  buyers.  The  dispatch  or  the  letters  should  be  sent  so 
that  they  may  reach  the  prospect  a  few  days  ahead  of  the  sales- 
man's call.  The  continental  companies  usually  leave  it  to  their 
salesmen  to  announce  their  visit  on  their  arrival  in  the  country, 
but  it  would  seem  to  be  the  better  plan  to  have  the  announce- 
ment come  from  the  home  office  and  from  the  head  of  the 
concern,  in  the  language  of  the  country  to  which  the  salesman 
is  sent.    This  letter  should  be  written  in  the  most  formal  and 


PREPARING  A   FOREIGN    SALES   PLAN  187 

courteous  manner.  Direct  solicitation  of  business  should  be 
avoided.  That  should  be  left  entirely  with  the  salesman.  The 
tone  of  the  letter  should  be  complimentary  and  dignified, 
aiming  rather  to  convey  the  impression  that  the  exporter  is 
desirous  of  establishing  friendly  relations  with  the  foreign 
house  than  to  promote  immediate  sales.  The  following  is  a 
sample  of  such  a  letter: 

Messrs.  J.  H.  Arroya  and  Company, 
Buenos  Aires, 
Argentina. 
Gentlemen : 

We  take  great  pleasure  in  announcing  that  we  have  decided  to 
send  a  representative  to  your  city,  Mr.  X.  Y.,  who  has  instructions  to 
learn  as  much  as  possible  about  the  conditions  in  your  country  in  our 
line  of  business.  He  is  leaving  on  the  15th  instant. 

We  have  directed  Mr.  X.  Y.  to  call  upon  you  on  his  arrival  in 
your  city  and  to  convey  to  you  our  kindest  regards. 

No  doubt  Mr.  X.  Y.  will  be  able  to  learn  a  great  deal  during 
his  stay  in  your  city  and  to  bring  back  the  knowledge  which  will  be 
most  useful  to  us  in  the  establishment  of  cordial  relations  with  the 
principal  business  houses  in  your  country,  and  in  improving  our 
methods.  We  earnestly  bespeak  for  Mr.  X.  Y.  your  favors,  which 
we  hope  to  be  able  to  reciprocate  in  the  near  future. 
With  our  best  regards,  we  beg  to  remain. 

Very  cordially  and  sincerely  yours. 


President  of Company. 

The  stationery  upon  which  such  letters  are  written  should 
bear  reference  to  banks  and  rating  agencies  at  home,  and,  if 
possible,  in  the  country  to  which  they  are  sent.  If  the  concern 
has  satisfied  influential  customers  in  the  country  which  the 
salesman  is  about  to  visit,  such  customers  might  be  mentioned 
in  a  delicate  way  in  the  body  of  the  letter. 

Occasionally  it  may  be  advisable  to  send  under  separate 
cover  a  catalogue  of  the  firm.  As  a  general  rule,  how^ever, 
this  should  not  be  done  and  the  task  of  actually  introducing 


l88  OPERATING   THE   ORGANIZATION 

the  goods  and  making  the  sale  should,  as  stated  above,  be  left 
to  the  salesman.  The  preliminary  letter  ordinarily  insures  the 
salesman  a  better  reception.  After  he  has  made  his  call,  his 
personal  reports — with  full  details  of  the  situation  in  every 
case — will  be  the  best  basis  for  the  future  follow-up  work. 
There  seems  to  be  no  better  rule  for  handling  this  matter  than 
the  principle  of  requiring  an  accurate  and  complete  report  of 
every  call  made  by  the  salesman  and  of  the  conditions  of 
every  established  account,  with  the  salesman's  suggestions  and 
recommendations  for  the  follow-up  work  to  be  done. 

Advertising  as  a  Follow-Up 

Advertising  is,  of  course,  a  follow-up  means  employed 
wherever  practicable  by  the  successful  houses  in  foreign  trade. 
It  must  necessarily  be  adjusted  to  local  conditions  and  it  is 
subject  to  the  same  special  handling  as  any  other  form  of 
follow-up  work. 

Certainly  the  house  that  sends  its  salesman  out  to  call  on 
the  foreign  trade  and  does  nothing  to  keep  in  touch  with  such 
trade  from  the  time  the  salesman  leaves  until  he  returns, 
perhaps  a  year  later,  is  not  realizing  the  full  benefit  from  the 
personal  work  of  its  foreign  representative.  The  work  of  the 
salesman  should  always  be  supplemented  by  correspondence 
and  literature,  as  well  as  by  seasonable  quotations. 

In  some  lines  of  business,  and  particularly  in  those  which 
do  not  admit  of  the  salesman's  carrying  samples  on  account 
of  their  bulk,  it  would  be  advisable  to  establish  either  perma- 
nent or  temporary  exhibition  rooms  for  displaying  samples. 

It  is  not  a  good  policy,  however,  to  mention  sales  details 
of  any  kind  in  the  letter  which  announces  the  salesman's  trip. 
The  representative  of  the  right  sort  will  find  a  proper  way 
of  bringing  his  proposed  customers  to  the  place  where  these 
samples  are  exhibited. 

The  salesman  should  be  supplied  with  letters  of  introduc- 


PREPARING   A    FOREIGN    SALES    PLAN  189 

tion  to  the  concerns  or  the  individuals  whose  acquaintance 
the  home  office  has  already  made  through  correspondence  or 
otherwise.  These  people,  including  the  officials  of  the  United 
States  government,  should  be  asked  to  supply  the  salesman  in 
turn  with  letters  of  introduction  to  various  concerns  of 
prominence.  All  such  letters  should  be  sent  by  the  salesman 
after  his  arrival  to  the  concerns  to  which  they  are  addressed 
and  should  state  the  day  on  which  he  will  call. 

The  average  American  business  man  may  think  that  this 
Is  entirely  too  much  ceremony  and  possibly  in  some  lines  this 
may  be  the  case.  As  a  rule,  however,  if  the  proposed  sales 
are  to  be  of  any  magnitude,  these  preliminary  arrangements 
are  almost  indispensable  to  the  selling  plan. 

Closing  Sales  by  Mail 

On  the  receipt  of  the  first  report  from  the  salesman  the 
home  office  should  adopt  proper  means  for  further  facilitating 
the  work  of  the  man  on  the  ground.  Especially  should  he  be 
aided  in  any  way  possible  in  closing  sales  which  he  may  have 
had  trouble  in  putting  through. 

If  a  sale  fails  because  the  prices  or  credit  arrangements 
which  the  salesman  is  authorized  to  make  are  unsatisfactory,  it 
may  be  found  necessary  to  write  to  the  buyer  direct,  but  in 
most  cases  the  policy  should  be  to  write  or  cable  to  the 
representative  on  the  ground  and  not  to  the  buyer. 

While  the  home  office  is  aiming  to  assist  the  salesman  by 
such  means  as  have  been  suggested  and  in  other  directions,  his 
"morale"  should  also  receive  proper  attention.  An  American 
in  a  foreign  country  is  apt  to  be  more  easily  discouraged  and 
disheartened  than  at  home.  And  as  his  state  of  mind  plays 
an  exceedingly  important  role  in  his  undertaking,  the  concern 
employing  him  should  frequently  show  that  it  takes  an  interest 
in  his  success.  He  should  be  communicated  with  by  cable  at 
least  weekly  and  by  letter  as  often  as  the  mails  can  reach  him. 


I90  OPERATING   THE   ORGANIZATION 

Co-operation  in  Foreign  Sales 

There  is  one  other  highly  important  point  to  which  every 
wise  trade  strategist  should  give  most  careful  consideration 
and  that  is,  whether  it  is  better  to  enter  the  field  alone  or  in 
co-operation  with  others.  Those  who  are  novices  in  interna- 
tional trade  or  whose  business  is  comparatively  small  may  do 
better  in  co-operation  with  others,  either  by  establishing  a 
joint  selling  agency  or  combining  otherwise  in  the  exploitation 
of  the  market.  In  such  an  event  the  plan  of  sales  may  have 
to  be  worked  out  on  entirely  different  lines,  necessitating  a 
great  deal  of  preliminary  investigation  which  would  not  have 
been  required  if  the  plan  were  strictly  individual. 

The  fact  has  already  been  stated  but  cannot  be  too  strongly 
emphasized  that  the  subject  of  co-operation  has  not  as  yet 
received  in  the  United  States  the  attention  it  deserves.  In 
other  countries,  particularly  Great  Britain  and  Germany,  great 
things  have  been  accomplished  in  foreign  trade  through  wise 
co-operation  of  the  producers  in  non-competing  lines.  They 
have  discovered  profitable  ways  of  combined  advertising,  dis- 
tribution, and  marketing  of  the  product.  As  a  matter  of  fact, 
export  trade  otherwise  unattainable  has  in  many  instances  been 
built  and  placed  upon  a  stable  and  enduring  basis  through  wise 
and  proper  co-operation. 

Of  course,  co-operative  methods  are  not  restricted  to  buy- 
ing and  selling.  There  is  co-operation  between  the  commercial 
interests  and  the  government,  between  the  producer  and  the 
shipper,  and  also  between  the  exporter  and  .the  banking  in- 
terests. 

If  one  form  of  co-operation  is  found  to  be  unnecessary  or 
impracticable  there  is  generally  some  form  of  it  which  will  be 
found  suitable  to  commerce  in  foreign  lands.  For  that  reason 
alone,  a  wise  sales  engineer  will  give  the  subject  of  co-opera- 
tion proper  attention  while  he  is  drawing  his  plans  for  a 
selling  campaign  abroad. 


PREPARING   A   FOREIGN    SALES   PLAN  191 

The  International  Sales  Manager 

To  know  the  cardinal  rules  which  enter  into  an  efficient 
sales  plan  is  to  anticipate  the  difficulties  of  successful  trade 
engineering — difficulties  which  can  only  be  surmounted  by  an 
expert.  A  wise  manufacturer  will  find  that  in  the  preparation 
of  a  permanent  plan  of  sales  he  should  enlist  the  services  of  an 
expert  trade  strategist  if  he  can  find  such  a  one.  The  problem 
is  not  only  where  to  find  him,  but  by  what  qualities  he  may 
be  recognized  or  should  be  selected.  He  should  be  a  successful 
domestic  trade  builder  engaged  in  the  study  of  a  particular 
market  and  in  touch  with  men  who  know  from  personal 
experience  the  different  angles  of  marketing,  such  as  adver- 
tising, distribution,  etc.,  in  the  particular  field.  A  man  of  the 
right  calibre  will  be  worth  all  that  he  costs. 

It  is  always  wiser  to  spend  more  money  on  the  preparation 
of  sales  plans  with  the  certainty  of  getting  it  back,  knowing 
that  through  such  preparation  the  success  of  the  project  is 
insured,  than  to  economize  in  working  up  the  plans  and  fail 
in  the  end. 


CHAPTER   XXIII 

SELECTING  MEN  FOR  FOREIGN  SERVICE 

The  Elements  of  Success 

It  has  been  asserted  that  the  elements  of  success  in  the 
average  commercial  undertaking  are  lo  per  cent  luck,  lo  per 
cent  the  nature  of  the  business,  and  80  per  cent  the  character 
and  personality  of  the  selling  and  executive  forces.  Whatever 
may  be  the  true  proportions  it  is  certain  that  in  foreign  trade 
the  character,  training,  and  personality  of  the  salesmen  play 
a  far  larger  part  in  determining  success  than  they  do  in 
domestic  trade,  and  that  properly  qualified  men  are  exceed- 
ingly difficult  to  find. 

Foreign  trade  is  not  a  simple  thing.  There  is  no  more 
intricately  adjusted  mechanism  than  the  trade  of  nations.  Its 
undertaking  on  a  large  scale  is  always  costly  and  the  firm  that 
is  not  prepared  to  send  a  properly  equipped  and  highly  quali- 
fied representative  provided  with  ample  funds  and  with  full 
authority  to  act  within  the  general  policy  previously  determined 
upon,  would  better  not  enter  the  field  of  direct  selling.  The 
man  selected  should  possess  the  following  essential  qualities: 

1.  Aptitude  and  adaptability 

2.  Special  knowledge  and  training 

3.  The  proper  personality 

Aptitude  and  Adaptability 

The  successful  salesman  may  be  assumed  to  have  a  natural 
aptitude  for  his  work.  One  does  not  turn  to  salesmanship  as 
the  means  of  earning  a  living  without  some  natural  aptitude 
for    approaching    the    stranger    and    winning    his    business. 

192 


SELECTING  MEN    FOR   FOREIGN    SERVICE  193 

Nevertheless,  considering  all  that  is  at  stake,  it  would  appear 
to  be  a  sound  policy  not  to  select  a  man  for  the  foreign  field 
until  ke  has  demonstrated  his  selling  capacity  in  the  domestic 
field  and  has  shown  some  evidence  of  his  ability  to  work 
effectively  under  varied  conditions. 

Of  even  greater  consideration  is  the  man's  ability  to  adapt 
himself  to  a  strange  environment  and  to  do  business  under 
conditions  which  are  vastly  different  from  any  he  has  hitherto 
experienced.  He  must  be  at  once  a  diplomat  and  a  psychologist 
and  above  all  he  must  have  the  quality  of  sympathy.  Unless 
he  can  cultivate  a  strong  personal  regard  for  the  people  with 
whom  he  deals  and  a  sympathy  for  their  problems,  the  rest 
of  his  equipment  will  count  for  little.  Sympathy  is  the  secret 
of  adaptability.  Arrogance  and  condescension  are  fatal.  The 
man  who  would  succeed  with  the  foreigner  must  fall  into  his 
gait  and  walk  with  him  as  a  friend  and  equal.  All  this  is,  of 
course,  necessary  for  any  good  salesman  anywhere,  but  in  the 
foreign  field  it  is  more  needed  than  at  home. 

A  "man  of  the  world"  is  after  all  merely  one  who  has 
learned  the  requirements  of  human  association  common  to 
well-bred  people  everywhere  and  who  can  adapt  himself  with 
ease  to  the  exigencies  of  every  occasion,  be  it  social  or  business. 
But  even  the  most  accomplished  cosmopolitan  is  not  to  be 
expected  to  be  equally  at  home  everywhere.  One  of  the  sales 
manager's  most  important  tasks  is  the  selection  of  the  type  of 
salesman  best  adapted  to  the  particular  field  he  has  in  mind. 

If  the  candidate  is  not  well  adapted  to  the  selected  field 
he  will  be  neither  happy  nor  successful.  It  is  easier  and  wiser 
to  find  the  one  who  is  best  suited  to  the  field  than  to  attempt 
to  fit  another  to  it.  Until  recently  there  were  not  a  few 
ambitious  American  manufacturers  who  were  inclined  to 
attempt  to  fit  the  foreign  environment  to  themselves.  But 
in  those  cases  also  the  lines  of  least  resistance  were  eventually 
found  to  be  the  shortest  distance  to  the  objective. 


194 


OPERATING   THE   ORGANIZATION 


Special  Knowledge  and  Training 

There  are  still  those  who  say  that  the  only  equipment 
necessary  for  the  American  salesman  is  his  ability  to  sell 
goods  and  that  special  training — even  a  knowledge  of  the 
language  of  the  country — is  superfluous.  All  such  talk  is 
sheer  nonsense  so  far  as  the  type  of  man  here  under  consider- 
ation is  concerned. 

Some  lines  of  merchandise  may  sell  without  any  great 
effort ;  they  may  sell  at  sight  and  a  salesman  is  sent  merely 
to  show  the  goods  and  take  the  orders.  These  are  rare  in- 
stances ;  there  are  few  lines  in  which  an  international  salesman 
needs  no  special  qualifications. 

Generally  speaking  the  salesman  needs,  besides  his  mastery 
of  his  line,  some  knowledge  of  the  languages  and  the  psychol- 
ogy of  the  races  among  whom  he  is  to  work,  with  some  fami- 
liarity with  their  economic  and  social  conditions. 

Outside  of  highly  technical  lines,  factory  experience  is 
seldorri  necessary  in  export  salesmanship. 

The  knowledge  of  language,  of  course,  is  almost  indis- 
pensable, and  yet,  in  many  countries,  and  especially  in  dealing 
with  importers,  commission  men,  and  jobbers,  a  foreign  repre- 
sentative will  get  along  if  he  can  talk  French  fairly  well,  and 
sometimes  if  he  knows  only  English.  This  is  especially  true 
of  nearly  all  the  European  countries  and  partly  true  of 
Latin  America. 

The  great  foreign-trading  nations  develop  their  foreign 
sales  staff  by  first  giving  them  a  fundamental,  theoretical  train- 
ing. They  send  them  as  clerks  into  foreign  countries  where 
they  are  educated  in  languages,  in  the  ways  of  the  people,  and 
in  all  the  practical  aspects  of  foreign  business.  Finallv  they 
are  brought  back  home  for  special  training  in  their  particular 
line  of  business.  Only  then  are  these  young  men  considered 
to  be  ready  to  act  as  representatives. 

A  man  can  best  be  trained  to  act  as  an  International  sales- 


SELECTING  MEN   FOR   FOREIGN   SERVICE  195 

man  or  representative  in  those  countries  where  the  same  lan- 
guage is  spoken  as  in  the  country  to  which  he  is  eventually  to 
be  assigned.  Even  the  greatest  amount  of  training  may  fre- 
quently yield  but  poor  results  otherwise.  The  man  who  is 
successful  in  Latin  America  may  be  useless  in  Russia  and  con- 
versely. In  the  case  of  foreign  trade  managers  or  advisers, 
no  such  intimate  knowledge  of  the  languages  or  of  the 
conditions  of  trade  in  any  particular  country  is  ordinarily 
required. 

Personality 

Personality  must  always  be  the  most  important  element  in 
determining  the  qualifications  of  the  international  salesman 
for  his  work.  Under  this  head  may  be  included  besides  those 
qualities  of  sympathy  and  savoir-faire ,  considered  in  connec- 
tion with  his  adaptability,  the  salesman's  selling  ability,  his 
character,  his  magnetism  and  persuasive  powers,  his  physical 
condition,  mental  equipqient,  moral  status,  and  working  habits. 

It  requires  a  very  delicate  analysis  to  resolve  the  per- 
sonal equation  into  its  component  parts.  The  easiest  way  is 
usually  the  natural  way  and  one's  intuitions  are  not  often, 
very  far  wrong. 

In  many  countries  international  trade  is  still  conducted 
upon  a  social  basis.  Even  in  Anglo-Saxon  countries  large 
sales  are  not  usually  made  over  the  counter  but  in  fashionable 
clubs,  hotels,  and  not  infrequently  in  private  residences  after 
a  friendly  dinner  or  at  an  informal  luncheon.  The  Chinese 
call  it  "friend  pidgin." 

Here  personal  liking  and  respect  play  a  large  role  and  the 
salesman's  personality  and  his  adaptability  is  tested  in  the 
highest  degree. 

Given  the  right  sort  of  personality  the  salesman  will  not 
lack  an  opportunity  to  bring  his  other  qualities  into  play  with 
some  confidence  of  success.     He  should  be  able  to  establish 


196  OPERATING   THE   ORGANIZATION 

not  only  a  receptive  state  of  mind  in  his  prospects,  but  that 
sympathetic  interest  which  wins  for  him  a  decided  preference, 
other  things  being  equal.  Then  if  he  has  his  share  of  the  other 
qualities  which  make  for  a  proper  personal  equipment  his 
success  is  sure. 

The  Right  Man  for  the  Right  Field 

In  selecting  salesmen  for  the  foreign  field  the  sales  man- 
ager will  be  called  upon  to  show  the  same  nice  discrimination 
that  he  uses  in  choosing  men  for  the  different  localities  of 
this  country.  He  sends  one  type  of  man  South  and  a  widely 
different  type  to  New  England  or  the  Northwest. 

In  choosing  men  for  Latin  countries,  Italians  or  French- 
men should  be  given  preference.  They  have  the  temperament 
and  the  manner  best  adapted  to  make  them  welcome.  Native 
salesmen  seldom  do  as  well  in  these  countries  as  the  foreigner. 

Americans  are  more  successful  in  France,  England,  a.id 
in  fact  in  all  of  the  continental  countries  except  Spain,  Portu- 
gal, and  such  Slavic  states  as  Russia,  Poland,  and  Bohemia. 
In  these  latter  countries  a  Slav  who  has  lived  long  enough  in 
America  to  become  fully  Americanized  will  be  found  most 
effective. 

Americans  also  do  well  in  Holland,  Belgium,  and  in  the 
Scandinavian  countries.  The  English  know  best  how  to 
handle  the  oriental  races.  In  Japan,  China,  India,  Siam, 
Egypt,  Persia,  and  in  all  the  oriental  countries  an  English- 
man will  do  better,  perhaps,  than  men  of  any  other  nationality. 

Selecting  the  Man 

The  process  of  selection  of  employees  in  America  is  too 
often  highly  mechanical  and  does  not  always  meet  the  best 
business  requirements.  Too  many  men  are  selected  by  rule 
of  thumb,  except  in  cases  where  they  may  owe  their  positions 
to  personal  influence.     The  eternal  application  blank  may  be 


SELECTING  MEN    FOR   FOREIGN   SERVICE  197 

effective  and  may  save  time  in  the  case  of  routine  employees, 
but  it  fails  completely  when  it  is  applied  to  many  of  the  excep- 
tionally gifted  and  highly  qualified  individuals  of  foreign 
birth  who  might  be  so  valuable  to  the  exporter.  To  them  it 
is  often  not  only  inexplicable  but  it  is  above  all  offensive  to 
their  susceptibilities.  Until  the  would-be  foreign  trader  is 
ready  to  understand  the  causes  for  what  may  at  first  seem  to 
be  the  exaggerated  "touchiness"  of  the  foreigner,  he  is  ill 
qualified  for  his  calling. 

In  any  event  it  is  well  to  see  every  candidate.  Frequently 
the  man  who  is  not  inclined  to  write  much  or,  perhaps,  any- 
thing about  himself  is  most  worth  seeing. 

Age  and  Experience 

While  in  certain  lines  it  is  necessary  to  employ  only  men 
of  successful  experience,  very  often  men  of  exceptional  abili- 
ties who  have  had  no  business  experience  would  and  do 
make  excellent  executives  or  salesmen,  excelling  by  far  those 
with  experience  and  special  knowledge  of  the  particular  line. 
It  is  a  poor  policy  to  pass  over  such  men  without  taking 
the  opportunity  of  judging  their  personality. 

The  continental  method  of  selecting  men  for  foreign  serv- 
ice never  confines  itself  to  young  men.  The  managers  of 
large  exporting  concerns  are  constantly  on  the  lookout  for 
remarkable  men  of  exceptional  ability  and  fitness  regardless 
of  age.  They  know  that  one  such  man  when  discovered  is 
worth  half  a  dozen  young  men  of  average  ability.  They  also 
know  that  there  are  many  instances  of  men  who  have  missed 
their  true  vocation  in  life  or,  like  Caesar,  have  only  come  to 
realize  when  no  longer  youths  their  natural  calling  and  real 
ambition.  So  the  continental  business  man  generally  keeps 
an  open  door  as  well  as  an  open  mind  to  all  applicants  of 
mature  years  who  may  come  to  convince  him  that  they  have 
a  special  aptitude  or  qualification  for  his  business. 


198  OPERATING  THE   ORGANIZATION 

In  England,  Holland,  and  in  Germany,  men  have  been 
found  in  middle  life  who  have  proved  themselves  veritable 
geniuses  in  the  promotion  of  foreign  trade  but  who  had  no 
earlier  training  and  indeed  no  previous  business  experience. 

Tests  of  Candidates 

Personnel  being  the  essential  part  of  an  organization,  one 
must  have  a  method  of  applying  an  adequate  and  proper  test 
in  its  selection.  This  is  determined  by  the  aid  of:  ( i )  impres- 
sions, (2)  demonstrations,  and  (3)  analysis. 

Impression  is  an  unconscious  form  of  analysis  which  is 
never  a  final  test  of  personal  qualification.  Some  men  are 
gifted  with  die  power  to  analyze  a  personality  with  great 
correctness  through  impressions  which  is  in  reality  the  gift 
of  intuition.  Most  men  who  achieve  great  success  as  leaders 
have  that  power.  It  is  advisable,  however,  only  to  use  this 
test  in  connection  with  the  other  two. 

Generally  it  is  thought  that  demonstration  is  the  most  re- 
liable test  of  personal  qualities,  but  it  is  impossible  to  apply 
it  always  in  conformity  with  the  laws  of  continuity  and  change. 

The  most  reliable  test  can  be  made  onl>  by  an  analysis  of 
qualities.  For  instance,  if  a  man  is  employed  for  a  certain 
position  you  must,  in  addition  to  his  special  qualifications,  con- 
sider his  general  qualifications,  as  physical  and  mental  condi- 
tion, moral  status,  habits  of  industry,  and  so  on. 

The  employer  should  be  guided  by  personal  impressions 
formed  through  an  actual  demonstration  of  these  qualities. 
Scientific  analysis  of  character  thus  far  has  been  applied  in  a 
very  limited  number  of  cases,  but  it  should  be  a  rule  of  our 
modern  executive  to  apply  such  a  test  as  far  as  possible.  It 
would,  obviously,  save  time  and  expense  if  an  employee  were 
to  demonstrate  his  qualities  before  he  is  hired  or  promoted, 
rather  than  to  depend  upon  the  impressions  formed  of  him 
by  his  superior. 


SELECTING  MEN   FOR   FOREIGN   SERVICE  igg 

It  will  be  found  that  it  will  pay  to  take  all  these  points 
into  consideration  and,  in  choosing  a  salesman  for  a  foreign 
field,  to  make  as  careful  an  analysis  of  character  as  possible 
from  every  angle  or  point  of  view  that  may  present  itself. 


CHAPTER   XXIV 

EDUCATION  FOR  FOREIGN  TRADE 

Requisites  for  Salesmanship  Success 

Salesmanship,  like  everything  else  in  life,  succeeds  best 
when  there  is  an  innate  ability,  but  to  be  most  successful  the 
salesman  must  have,  in  addition  to  his  ability,  a  thorough 
knowledge  of  the  article  he  is.  selling;  he  must  be  deeply  in- 
terested in  his  work  and  enthused  with  his  proposition  and  he 
should  have  fully  decided  to  make  salesmanship  his  life-work. 
Then,  and  not  until  then,  will  he  have  all  the  fundamental 
elements  of  success. 

This  applies  to  salesmanship  in  general.  In  considering 
international  salesmanship  a  more  difficult  problem  is  pre- 
sented, for  the  best  domestic  salesman  will  have  much  to 
learn  when  he  enters  the  field  of  foreign  trade.  A  smattering 
of  the  language  of  the  country  into  which  he  is  to  be  sent, 
his  samples,  and  a  steamship  ticket  never  made  an  interna- 
tional salesman.  In  addition  to  all  the  qualifications  of  the 
domestic  salesman  he  must  know  the  people  among  whom  he 
is  to  do  business — their  ways  and  their  requirements,  as  well  as 
their  language.  If  he  has  never  lived  among  the  people  with 
whom  he  is  going  to  do  business,  instead  of  acquiring  enthu- 
siasm, he  may  receive  a  shock  to  his  self-esteem. 

European  Methods 

A  man,  no  matter  what  his  innate  ability,  cannot  become 
a  great  lawyer  without  the  right  sort  of  preparation.  The 
same  thing  is  true  in  foreign  trade  and  the  science  of  foreign 
trade,  like  any  other  science,  has  its  theory  and  its  practice. 

200 


EDUCATION   FOR   FOREIGN   TRADE  201 

The  great  foreign  trading  countries,  recognizing  this,  have 
brought  international  business  to  the  point  of  a  science.  They 
educate  and  train  their  youth  for  the  work  in  foreign  coun- 
tries with  special  care  and  according  to  scientific  principles. 

There  are  technical  commercial  schools  in  France,  Switzer- 
land, Belgium,  and  even  in  Canada,  called  by  the  French 
"Ecoles  des  Hautes  Etudes  en  sciences  commercials,"  which 
teach  commerce  as  a  science  and  confer  degrees  in  commercial 
sciences. 

There  are  two  methods  of  scientifically  developing  the 
selling  force.  One  is  a  technical  school  education  followed 
by  actual  field  experience,  a  clinical  course  so  to  speak;  the 
other  consists  of  substituting  office  training  at  home  and 
abroad  for  the  technical  school  education.  Both  aim  to  teach 
the  same  thing  in  a  different  way.  Such  methods  are  appar- 
ent in  other  lines  of  endeavor — law  students,  for  example, 
frequently  receive  their  entire  education  in  law  offices  and  in 
the  courts,  and  army  officers  are  frequently  raised  from  the 
ranks. 

These  two  methods  may  now  be  briefly  surveyed  and  their 
requirements  and  scope  noted. 

Technical  Education 

The  technical  schools  where  foreign  trade  is  taught  treat 
the  following  subjects:  commercial  geography  and  history, 
commercial  policies  of  different  countries,  consular  systems 
and  requirements,  transportation,  insurance,  packing,  tariff 
laws  and  procedure  and  the  commercial  laws  of  the  princi- 
pal countries,  industrial  technology,  the  science  of  finance  and 
of  banking,  languages,  commercial  usages  of  foreign  coun- 
tries, the  theory  and  practice  of  statistics,  and  comparative 
trade  psychology.  From  the  variety  of  these  subjects  it  can 
be  inferred  that  the  aim  is  not  merely  to  prepare  a  man  for 
salesmanship  but  also  to  give  him  a  general  education  in  the 


202  OPERATING   THE    ORGANIZATION 

domain  of  commerce,  which,  if  followed  by  practical  training 
and  experience,  will  be  helpful  in  qualifying  him  for  any 
position. 

Having  completed  the  course  in  school,  the  youth  is  placed 
in  the  factory  and  later  in  the  office  where  he  learns  thoroughly 
the  particular  business  in  which  he  is  to  engage.  Finally,  if 
he  is  destined  for  foreign  trade,  he  is  sent  abroad  as  a  clerk 
in  some  foreign  house  where  he  learns  all  the  intricacies  of 
the  business  as  it  is  transacted  there.  In  this  way  he  gains  a 
practical  knowledge  of  foreign  languages  and  learns  the  psy- 
chology and  customs  of  the  natives.  After  that  he  is  ready 
for  his  w^ork  as  a  salesman  or  agent  in  the  foreign  field. 

Practical  Education 

The  other  method  of  preparing  a  man  for  foreign  trade  is 
to  take  a  promising  youth  and  give  him  a  thoroughly  prac- 
tical education,  without  sending  him  to  any  technical  school. 
He  works  in  a  factory  for  a  few  months  and  there  learns  the 
process  of  manufacturing  and  the  nature  of  the  goods  he  is 
to  sell.  Then  he  goes  abroad  to  study  under  a  local  manager. 
When  his  superiors  are  satisfied  that  he  knows  enough  he  is 
given  field  work.  Then,  having  gained  practical  experience, 
he  comes  home  for  final  instructions  after  which  he  is  ready 
for  a  permanent  position  as  salesman  in  the  country  in  which 
he  received  his  training. 

Much  that  is  taught  in  technical  schools  is  omitted  in  office 
training  and  the  subjects  which  are  taught  are  of  more  direct 
practical  value.  They  are  as  follows:  knowledge  of  the  business 
and  of  the  goods  he  is  to  sell ;  knowledge  of  competitors'  goods 
and  methods  of  competition  in  vogue ;  knowledge  of  the  people 
— their  language,  customs,  and  the  trade  conditions  prevailing 
among  them;  familiarity  with  the  technique  of  salesmanship, 
Including  the  methods  of  approaching  a  customer,  closing  a 
sale,  renewing  an  order,  and  keeping  a  customer ;  consular  and 


EDUCATION   FOR   FOREIGN   TRADE  203 

custom  house   formalities  and  all  that  pertains  to  shipping, 
maritime  insurance,  etc. 

Whether  it  is  worth  while  to  spend  three  years  in  a  tech- 
nical school  and  then  to  go  practically  over  the  same  ground 
in  an  office,  is  a  problem  that  each  must  solve  for  himself. 
Undoubtedly  school  training  combined  with  office  training  is 
apt  to  bring  the  best  results ;  but  while  school  education  may 
be  dispensed  with,  a  thorough  office  and  business  training  in 
the  field  is  considered  as  indispensable  everywhere  except  in 
our  own  country. 

American  Education  in  Foreign  Trade 

In  America,  formal  instruction  in  foreign  trade  is  given 
in  the  special  schools  of  some  colleges  and  universities.  Among 
the  best-known  institutions  offering  such  courses  are:  the 
Amos  Tuck  School  of  Business  Administration  and  Finance 
of  Dartmouth  College,  the  Graduate  School  of  Business  Ad- 
ministration of  Harvard  University,  the  Wharton  School  of 
Finance  and  Commerce  of  the  University  of  Pennsylvania, 
the  Schools  of  Commerce  at  Columbia  and  at  New  York  Uni- 
versity, and  of  the  Universities  of  Pittsburgh,  California,  Chi- 
cago, Michigan,  Illinois,  Cincinnati,  and  Tulane  University. 
The  methods  and  the  curricula  in  all  these  American  schools 
of  commerce  closely  resemble  each  other.  On  the  whole  they 
bear  a  very  close  resemblance  to  the  English  institutions  of 
similar  kind,  with  some  tendency  to  give  instruction  in  the 
subjects  taught  by  the  continental  high  schools  of  com- 
merce. 

The  main  defect  In  the  courses  in  these  schools  is  that 
they  differ  little  from  the  ordinary  collegiate  education,  that 
only  the  most  insignificant  attempt  has  been  made  so  far  to 
teach  the  theory  of  foreign  trade  and  that  no  attempt  to  teach 
its  practice  is  yet  evident.  It  is  true  that  the  fundamental 
studies  leading  to  the  knowledge  of  foreign  trade  need  not  be 


204  OPERATING   THE   ORGANIZATION 

markedly  differentiated  from  those  in  the  preparation  for  do- 
mestic trade.  For  instance,  training  in  the  principles  of  account- 
ing, in  the  organization  of  corporations,  in  finance,  in  com- 
mercial law,  and  in  commercial  history  and  geography  should 
be  equally  required  from  all  students.  But  when  it  comes  to 
the  study  of  marketing  methods  and  policies,  if  the  educator 
wishes  to  initiate  the  student  into  the  central  activities  of 
business,  the  mysteries  of  buying  and  of  selling  and  the  variety 
of  interdependent  factors,  he  should  not  be  satisfied  with 
teaching  him  the  ordinary  commercial  geography  and  a  jumble 
of  miscellaneous  information  which,  however  interesting  it 
may  be,  leads  nowhere. 

Signs  of  departure  from  this  worn-out  practice  are  be- 
ginning to  appear.  Colleges  are  opening  special  classes  for 
the  study  of  foreign  trade ;  Y.  M.  C.  A.'s  are  doing  likewise. 
Some  special  schools  are  being  opened  and  there  are  a  few 
correspondence  courses  on  the  subject. 

Status  of  American  Education  in  Foreign  Trade 

In  so  far  as  school  training  for  foreign  trade  is  concerned, 
the  United  States  is  merely  in  the  initial  stages.  The  attempts 
of  our  colleges  and  universities  to  establish  special  courses  in 
foreign  trade  have  too  often  presented  defects  such  as  those 
mentioned  above,  viz: 

1.  Too  much  reliance  is  placed  upon  purely  theoretical 

and  academic  training  without  any  background  of 
practical  experience  or  of  business  experimenta- 
tion. 

2.  The  courses  are  as  a  rule  too  general,  embracing  a 

great  variety  of  subjects  without  proper  specializa- 
tion or  sufficient  concentration  on  the  matters  most 
vital  to  the  future  foreign  trader. 

3.  The  employment  of  the  so-called  "experts"  In  a  spe- 

cial line  as  supplemental  teachers  or  lecturers  has 


EDUCATION   FOR   FOREIGN   TRADE  205 

not  been  adequately  supervised  and  has  resulted 
in  lectures  on  unrelated  subjects  and  in  a  failure 
to  secure  proper  co-ordination  between  theory 
and  practice. 

The  attempts  of  the  Y.  M.  C.  A.'s,  the  mail  courses,  and 
the  schools  established  by  business  concerns  are  defective  in 
that: 

1.  The  courses  are,  for  the  most  part,  inadequate  and 

give  no  more  than  a  superficial  idea  of  the  sub- 
jects taught. 

2.  They  attempt  to  teach  matters  which  to  be  under- 

stood properly  require  a  mature  mind  or  a  broad 
preliminary  school  education  which  is  not  always 
possessed  by  the  student  of  these  courses. 

3.  There  is  an  absence  of  actual  practice  in  matters 

which  cannot  be  mastered  sufficiently  from  books 
and  lectures,  as  for  example  the  languages  and 
a  knowledge  of  the  national  characteristics  of  for- 
eign peoples. 

In  so  far  as  self -education  is  concerned  there  is  a  lack  of 
properly  correlated  literature  on  the  subjects  that  deal  with 
foreign  trade  and  there  is  also  the  difficulty  of  securing  proper 
guidance. 

Practical  Training  for  Foreign  Trade 

One  of  the  greatest  experts  in  the  United  States  has  this 

to  say  about  training  men  for  foreign  work: 

In  a  broad  way,  it  seems  that  if  the  article  were  a  piece  of 
machinery  or  some  technical  product,  the  best  place  to  train  men  for 
marketing  it  would  be  at  the  factory  where  it  is  made,  bringing  men 
from  the  countries  where  it  was  desired  to  market  the  product  for  a 
six  months'  or  a  year's  study  at  the  factory  in  America.  Then  have 
American  factory  men,  versed  in  the  language  of  such  foreign  coun- 
tries, accompany  the  new  recruit  back  to  the  proposed  field  of  en- 


2o6  OPERATING   THE   ORGANIZATION 

deavor,  forming  a  team  composed  of  the  man  from  the  country  where 
the  marketing  is  to  be  done,  who  has  had  this  factory  training  on  the 
article  made  abroad,  and  another  man,  not  necessarily  a  factory  trained 
man,  but  a  scientifically  trained  salesman  who  is  familiar  with  the 
language  and  represents  the  factory  and  the  American  idea  of  market- 
ing, to  the  end  that  this  combination,  representing  the  viewpoints  of 
both  America  and  the  market,  should  successfully  impress  the  trade 
and  the  consumers,  through  proper  organization  and  advertising,  with 
the  merits  of  the  merchandise  to  be  sold. 

There  is  much  to  be  said  in  favor  of  bringing  the  foreigner  to 
America  to  be  trained  on  our  products  here,  with  the  idea  of  sending 
him  back  to  market  them;  on  the  other  hand,  there  is  much  to  be 
said  for  sending  the  trained  American,  who  is  entirely  familiar  not 
only  with  our  products  but  also  with  our  marketing  methods  and  the 
policies  behind  our  marketing  manufacturers  and  companies,  into  the 
foreign  field  to  study  the  people  and  the  language  and  to  represent 
us.  The  combination  of  the  two  would  be  the  best  means  with  which 
to  begin  the  capture  of  a  foreign  market  or  to  retain  it  permanently. 

But  whether  the  youth  has  been  trained  in  an  office  and 
factory,  or  both  in  the  factory  and  the  school,  it  does  not  mat- 
ter so  long  as  he  receives  an  adequate  training.  The  question 
is  how  seriously  handicapped  is  the  salesman  who  has  had  no 
such  training  when  he  faces  a  well-trained  competitor? 

Natural  Qualifications  Required  in  Foreign  Trade 

It  must  not  be  assumed  that  foreigners  train  their  young 
men  in  foreign  trade  without  due  regard  to  their  inborn  quali- 
fications, for  they  pay  as  much  attention  to  these  factors  in 
selecting  their  trade  representatives  as  they  do  in  the  case  of 
their  army  officers. 

Among  the  natural  qualifications  there  is  none  more  impor- 
tant outside  of  strong  personality  and  capacity  for  work  than 
"nerve."  This  term  is  not  to  be  understood  as  implying  the 
quality  sometimes  known  among  Americans  as  "gall"  which 
Is  a  species  of  arrogant  independence  and  pertinacity  that  is 
impervious  to  any  feeling  of  insult  or  consideration  of  the 


EDUCATION   FOR   FOREIGN   TRADE  207 

other  man's  rights.  By  "nerve"  is  meant  that  state  of  mind 
which  is  not  subject  to  discouragement  and  mental  depres- 
sion. This  quahty  the  world  traders  rank  highest  among  in- 
nate qualifications.  It  is  only  too  easy  to  become  discouraged 
and  depressed  in  a  strange  land  among  strange  people.  Once 
that  state  of  mind  overcomes  a  salesman  he  cannot  be  effi- 
cient any  more  than  a  coward  can  be  an  efficient  fighter.  Nerve 
is  the  salesman's  courage. 

Haphazard  Training  for  Foreign  Trade 

The  usual  way  in  which  the  American  exporters  enlist  men 
for  foreign  work  is  first  to  find  a  man  who  speaks  the  lan- 
guage of  the  country  with  which  the  concern  wishes  to  de- 
velop trade.  Then  if  his  character  and  previous  record  are 
found  to  be  satisfactory  he  is  sent  abroad.  Frequently  such 
men  are  natives  of  the  country  into  which  they  are  sent  but 
their  sales  experience,  if  they  have  had  any,  has  usually  been 
only  in  the  United  States. 

Another  way  is  to  pick  out  one  of  the  office  force  and  in- 
duce him  to  study  the  language  of  the  country  with  which 
tr'ade  is  contemplated,  give  him  some  lessons  in  salesmanship, 
and  then  hand  him  a  sample  case  and  a  steamship  ticket  and 
away  he  goes  to  battle  for  the  conquest  of  the  world's  trade. 

Sometimes  the  training  in  foreign  salesmanship  begins  and 
ends  by  having  the  prospective  salesman  learn  by  heart  a  "sales 
talk"  which  he  is  to  recite  before  those  whom  he  will  try  to 
win  as  customers.  Such  a  sales  talk  may  have  been  written 
by  a  man  who  never  saw  a  foreign  country  and  who  knows 
absolutely  nothing  of  the  conditions  there  or  of  the  charac- 
teristics of  the  people.  Frequently  these  talks  are  written  by 
a  person  who  never  interviewed  a  prospect  or  sold  a  penny's 
worth  of  goods.  What  wonder  that  the  American  salesman 
with  such  preparation  finds  himself  tremendously  handicapped 
in  the  race  against  his  European  competitors. 


2o8  OPERATING   THE   ORGANIZATION 

Some  firms  attach  much  importance  to  the  sales  talk  but, 
after  an  extensive  study  of  the  subject,  no  case  has  been  found 
in  which  it  has  been  used  successfully  in  foreign  trade.  It  is 
seldom  used  by  the  best  salesmen  even  in  the  home  trade.  Its 
usefulness  consists  largely  in  strengthening  the  memory  on 
principal  points  of  merit,  or  arguments  in  favor  of  the  mer- 
chandise. 

The  manufacturers  who  insist  that  their  salesmen  should 
know  the  manufacturing  end  of  the  business  as  thoroughly  as 
it  is  known  to  the  technical  staff  of  engineers  are  also  often 
wrong.  The  idea  that  the  man  who  knows  all  the  intricacies 
of  the  manufacture  of  a  given  article  will  necessarily  be  able 
to  explain  the  proposition  better  to  the  prospective  purchaser  is 
a  mistaken  idea.  It  is  often  more  difficult  for  a  highly  trained 
technical  man  than  for  one  of  less  technical  knowledge  to  ex- 
plain a  complicated  mechanism  so  that  the  layman  can  easily 
understand  it.  Some  knowledge  of  the  manufacturing  end  of 
the  business  is,  however,  a  valuable  asset  and  there  are  times 
when  technical  training  is  indispensable. 

They  are  also  mistaken  who  think  that  a  man  must  have  a 
long  association  with  a  particular  line  in  order  to  qualify  as 
a  finished  salesman  in  that  line.  A  born  salesman  can,  after 
a  brief  study,  sell  locomotives  as  easily  as  he  can  sell  peanuts 
and  popcorn. 

Why  We  Have  Few  Salesmen  Qualified  for  Foreign  Trade 

While,  as  has  been  pointed  out,  an  increasing  number  of 
our  American  institutions  are  offering  opportunities  for  the 
study  of  foreign  trade,  there  are  not  as  yet  any  institutions 
that  offer  the  complete  technical  and  practical  training  ac- 
corded to  the  salesmen  of  our  European  competitors.  Our 
business  schools  until  recently  prepared  youths  only  for  cler- 
ical work.  Unfortunately  also  we  have  no  sources  from  which 
to  draw  the  supply  of  our  international  sales  staff".     All  our 


EDUCATION   FOR   FOREIGN   TRADE  209 

preparation  up  to  the  present  time  has  been  desultory  and 
empirical. 

For  these  reasons  salesmen  properly  trained  for  foreign 
trade  are  few  in  number  and  difficult  to  find,  which  accounts 
in  a  measure  for  the  transaction  of  so  much  of  our  business 
through  the  commission  houses. 

It  would  seem  that  the  best  way  for  a  concern  to  develop 
its  foreign  sales  staff  would  be  to  select  a  number  of  capable 
young  men,  give  them  the  necessary  theoretical  education, 
train  them  in  its  business,  and  send  them  abroad  into  the 
countries  where  the  firm  proposes  to  trade.  They  should  re- 
main there  at  least  a  year  and  learn  the  languages,  the  ways 
of  the  people,  and  trade  customs. 

In  some  few  cases  it  may  be  possible  to  secure  former  em- 
ployees of  the  Department  of  Commerce  who  have  served 
in  the  country  where  the  concern  is  interested.  Satisfactory 
results  are  not  necessarily  obtained  by  employing  foreigners 
as  salesmen  abroad.  The  thing  for  the  exporter  to  do  is  to 
develop  his  own  staff  for  foreign  work  as  he  develops  it  for 
local  work,  and  if  he  understands  his  business  he  need  not 
fear  the  results. 


CHAPTER   XXV 

EDUCATION  FOR  FOREIGN  TRADE  (Continued) 

The  Export  Office  as  a  Training  School 

When  a  business  man  begins  to  study  ways  and  means  of 
extending  the  methods  of  marketing  his  product  to  foreign 
countries  and  seeks  to  learn  something  about  the  mechanism 
of  exporting,  he  is  beginning  to  take  a  course  in  foreign  trade 
in  the  school  of  practical  experience.  In  many  cases  this  is 
the  only  school  in  which  the  exporter  studies  and  under  simple 
conditions  it  is  all  that  is  required.  But  the  modern  educa- 
tional tendency  is  to  combine  where  possible  practical  expe- 
rience with  a  thorough  grounding  in  principles  and  theory,  and 
the  wider  the  range  of  a  business  man's  commercial  knowledge, 
the  better  equipped  is  he. 

Until  our  American  educational  institutions  begin  to  grad- 
uate men  thoroughly  trained  in  both  the  theory  and  the  prac- 
tice of  foreign  trade,  the  task  of  training  his  staff  will  continue 
to  devolve  upon  the  exporter  himself.  When  he  becomes 
convinced  of  the  futility  of  sending  unqualified  representa- 
tives into  the  foreign  field,  and  becomes  tired  of  having  in- 
competent clerks  encumber  his  office,  he  will  realize  that  it 
is  not  only  necessary  for  him  to  train  his  own  men,  but  that 
such  training  offers  to  him  an  opportunity  of  producing  a  staff 
which  will  be  far  better  equipped  than  that  of  many  of  his  com- 
petitors. The  exporter  himself  in  many  cases  is  better  qualified 
for  this  task  than  are  some  of  the  professional  instructors. 

If  he  uses  common  sense  and  keeps  his  objective  clearly  in 
mind,  he  may  produce  results  that  will  compare  favorably  with 
those  of  professional  schools  in  practical  results. 

210 


EDUCATION    FOR   FOREIGN   TRADE  211 

The  School  and  Shop  Method 

There  is  an  increasing  trend  in  modern  education  towards 
vocational  instruction  conducted  simultaneously  with  the  more 
formal  and  conventional  work  of  the  classroom.  This  has 
found  expression  in  what  is  sometimes  called  'The  School 
and  Shop  Method"  by  which  boys  are  enabled  to  spend  part 
of  their  day  in  acquiring  the  rudiments  of  a  trade  in  a  shop 
or  factory,  returning  to  school  for  formal  instruction  later 
in  the  day.  This  system  has  brought  such  boys  a  small  income, 
has  satisfied  their  desire  to  earn  money,  has  supplied  the  shop 
with  picked  apprentices,  and  has  not  deprived  the  boys  of 
the  school  training  without  which  they  would  be  handicapped 
all  their  lives. 

So  far  such  opportunities  have  been  almost  entirely  re- 
stricted to  the  shop  and  factory.  Many  boys  have  fiailed  to 
take  advantage  of  it,  owing  to  the  more  or  less  mistaken  prej- 
udice against  "overalls  and  jumper."  Were  similar  chances 
in  an  exporter's  office  open  to  our  youth  of  high  school  and 
college  age,  there  would  be  more  applicants  than  places  to  be 
filled.  Such  young  men  would  command  a  relatively  small 
salary,  they  would  have  a  very  definite  idea  of  what  they 
wanted  to  become,  and  from  them  the  exporter  could  recruit 
a  picked  staff  that  would  be  of  great  value  to  him. 

Again,  considering  the  subjects  which  form  a  part  of  the 
instruction  for  foreign  trade  in  Europe,  it  will  be  evident  that 
there  are  many  of  them  to  which  the  exporter  could  not  do 
justice  and  might  better  leave  to  the  evening  school,  the  special 
school,  or  to  the  college  lecture.  Such  subjects  are  economic 
theory,  money  and  banking,  history  of  foreign  countries,  com- 
mercial geography,  foreign  languages,  psychology.  At  the 
same  time  there  is  not  one  of  these  subjects  that  will  not  be 
motivated,  made  more  interesting,  and  transferred  from  the 
realm  of  theory  to  that  of  the  pupil's  own  vocation  by  reason 
of  his  simultaneous  training  in  the  exporter's  office. 


212  OPERATING  THE  ORGANIZATION 

On  the  other  hand,  the  subjects  the  essentials  of  which 
are  best  acquired  in  the  exporter's  office,  will  take  on  a  new 
and  broader  significance  when  the  pupil  receives  the  point  of 
view  of  the  college  lecturer,  treating  them  from  an  instruc- 
tional and  theoretical  standpoint.  In  other  words,  the  stu- 
dent cannot  afford  to  confine  himself  exclusively  to  either 
the  classroom  or  the  office  in  his  attempts  to  master  any  one 

topic. 

When  the  exporter  has  selected  his  young  men  for  train- 
ing he  should  consider  it  a  part  of  his  business  to  see  that 
they  register  in  the  proper  institutions,  attend  their  classes 
regularly,  and  make  satisfactory  progress. 

Opportunities  for  Study  of  Foreign  Trade 

In  New  York  there  are  plenty  of  opportunities  for  the 
study  of  foreign  trade,  as  indicated  in  the  preceding  chapter. 
These  courses  are  offered  at  times  that  make  it  possible  for 
the  student  to  confine  his  study  to  evening  and  afternoon 
classes,  or  even  exclusively  to  evening  work. 

In  most  of  the  larger  cities  the  Y.  M.  C.  A.  offers  courses 
covering  at  least  a  part  of  the  subject.  When  such  courses 
are  not  available  there  is  the  possibility  of  a  mail  order  course. 
As  already  noted,  all  of  these  courses  have  their  limitations, 
but  their  short  comings  can,  in  a  large  measure,  be  offset  by 
the  exporter's  suggestions  and  his  supervision  of  the  student's 
progress. 

When,  for  one  reason  or  another,  no  formal  instruction  is 
available  the  student,  if  he  is  made  of  the  right  stuff,  may 
rely  entirely  on  text-books  and  educate  himself.  Here  there 
is  the  great  danger  of  becoming  lost  in  the  mazes  of  the 
subject.  Foreign  trade  offers  a  vast  field  for  study  and  its 
domain  is  not  clearly  delimited.  A  public  library  in  one  of  our 
large  cities  once  attempted  a  classification  of  books  which  relate 
more  or  less  directly  to  foreign  trade,  but  the  classification 


EDUCATION    FOR   FOREIGN    TRADE  213 

collapsed  under  its  own  weight  when  it  became  apparent  that 
a  majority  of  the  books  in  the  library,  outside  of  the  realm 
of  fiction  and  the  arts,  had  their  bearing  on  this  most  com- 
prehensive subject. 

A  Practical  Course  in  Foreign  Trade 

For  the  sake  of  the  student  who  is  willing  to  attempt  to 
educate  himself,  as  well  as  for  the  exporter  who  proposes  to 
train  his  own  staff,  the  following  suggestive  course  in  the 
study  of  foreign  trade  is  offered. 

In  preparing  an  outline  of  a  practical  course  in  foreign 
trade  the  different  types  of  position  to  be  filled  have  been 
borne  in  mind.  The  curriculum  should  fit  every  demand  and 
cover  the  entire  range  of  practical  foreign  trade  knowledge. 
While  the  student  should  give  his  attention  to  every  item  in  the 
course,  the  guiding  idea  should  be  specialization. 

The  positions  open  in  export  service  come  under  three  gen- 
eral heads:  (i)  the  investigator,  (2)  the  salesman,  and  (3)  the 
office  man.  To  the  first  class  belong  the  commercial  in- 
vestigators; to  the  second  class  the  sales  managers,  traveling 
men,  buyers,  branch  managers,  and  the  active  sales  exec- 
utive; to  the  third  class  the  exporter,  shipping  clerk,  book- 
keeper, correspondent,  and  the  office  executive.  It  is  obvious 
that  w4iile  the  student  of  every  class  must  possess  a  general 
knowledge  of  foreign  trade  land  that  each  class  must  special- 
ize more  intensively  in  some  subjects  than  in  others,  those 
planning  to  go  to  a  certain  country  must  specialize  further 
in  what  pertains  especially  to  that  country. 

At  the  outset  it  must  be  assumed  that  everyone  under- 
taking a  course  in  foreign  trade  has  a  fairly  good  general 
education,  that  he  knows  his  own  language,  some  history, 
geography,  arithmetic,  and  is  familiar  with  the  rudimentary 
business  principles,  organization,  land  commercial  usages  in 
his  own  country.    If  he  has  had  a  high  school  education,  that 


214  OPERATING   THE   ORGANIZATION 

is  a  start.  If  he  has  had  collegiate  training  it  will  help,  but 
it  is  more  important  that  he  be  level-headed,  wide-awake, 
with  some  practical  business  experience.  He  will  then  be  able 
to  master  this  course  of  practical  foreign  trade  w^ithin  a  period 
of  two  years.  In  some  cases  from  six  months  to  a  year  will 
be  sufficient. 

The  course  should  include  the  following  subjects: 

1.  Languages 

2.  Essentials  of  Economics  and  Business  Technique 

3.  Foreign  Trade  Strategy 

4.  Salesmanship  (Domestic  and  Foreign) 

5.  Commercial  Law 

6.  Commercial  Geography  and  History 

7.  Foreign  Trade  Machinery 

8.  Foreign  Trade  Psychology 

9.  Foreign  Trade  Technology 

10.  Banking  and  Finance 

11.  Practice  in  Foreign  Trade 

1.  Languages.  French  and  the  language  of  the  country 
in  which  one  proposes  to  act  should  both  be  studied  until  they 
can  be  read,  spoken,  and  written  with  ease  and  correctness. 
This  can,  of  course,  be  done  most  easily  and  to  best  advantage 
by  daily  contact  with  those  wlio  claim  the  language  as  their 
native  tongue. 

French  is  particularly  useful  because  it  gives  the  founda- 
tion for  other  romance  languages  and  because  it  is  so  gen- 
erally spoken  by  foreigners.  International  business  corre- 
spondence should  be  studied  in  detail  in  connection  with  the 
study  of  the  languages. 

2.  Essentials  of  Economics  and  Business  Technique. 
Under  the  head  of  economics  and  business  technique  should 
be  taught  something  of  the  essentials  of  organization  and 
machinery  of  modern  business  enterprises.     Amone^  the  sub- 


EDUCATION   FOR  FOREIGN   TRADE  215 

jects  studied  should  be  advanced  accounting,  statistics,  for- 
eign policies  and  practices  in  the  principal  businesses  both  at 
home  and  abroad,  relation  of  imports  to  exports,  and  of 
finance,  transportation,  and  banking  to  foreign  trade.  Prin- 
ciples of  business,  wholesale  and  retail  merchandising,  ques- 
tions of  the  day,  export  problems,  the  elements  of  political 
economy,  and  business  procedure  in  the  selected  field,  should 
receive  careful  attention. 

3.  Foreign  Trade  Strategy.  The  student  should  be  taught 
how  to  obtain  strategic  business  information.  For  this  pur- 
pose he  should  study  from  the  directories,  the  names,  loca- 
tions, and  functions  of  trade  organizations  and  government 
bureaus  from  which  trade  information  can  be  obtained.  He 
should  also  learn  something  of  the  principal  foreign  markets 
and  the  names  of  some  of  the  most  prominent  foreign  firms 
and  dealers  throughout  the  world.  He  should  familiarize 
himself  with  governmental  activities  in  foreign  trade  in  the 
principal  countries  with  the  lists  of  official  publications,  adver- 
tising mediums,  and  books  and  articles  bearing  on  the  subject. 

4.  Salesmanship.  Under  the  head  of  salesmanship  will 
be  taught  the  art  of  buying  and  selling,  the  psychology  of 
the  sale,  with  special  reference  to  conditions  and  methods  in 
different  countries.  Not  merely  barter  and  sale,  but  selling 
methods,  sales  organizations,  the  manner  of  approach  in  dif- 
ferent countries,  and  the  different  classes  of  merchandise 
should  be  considered.  Selling  by  mail,  marketing  plans,  poli- 
cies and  methods,  the  framing  of  circular  letters  and  of 
letters  of  inquiry,  the  use  of  cables  and  office  practices  abroad 
should  also  be  included  in  the  course  of  study. 

5.  Commercial  Law.  The  student  should  know  some- 
thing of  commercial  law  in  general  with  special  reference  to 
its  status  in  the  different  countries  of  the  world.  It  is  most 
essential  that  he  should  know  the  consular  requirements  and 
formalities,   custom   laws  and   regulations,  laws  relating  to 


2i6  OPERATING   THE   ORGANIZATION 

samples,  travelers,  and  printed  matter,  the  law  relating  to 
trade-marks,  patents,  maritime  law,  and  marine  insurance. 

6.  Commercial  Geography  and  History.  The  value  and 
necessity  of  the  study  of  commercial  geography  and  history 
are  self-evident.  The  one  gives  the  most  essential  and  concrete 
information  concerning  those  elements  that  determine  trade 
opportunities;  the  other  assists  in  the  understanding  of  pres- 
ent conditions  by  a  study  of  the  past. 

7.  Foreign  Trade  Machinery.  The  student  should  be 
taught  the  theory  upon  which  export  and  import  business  is 
built  and  conducted  and  the  detailed  functions  of  each  factor 
in  foreign  trade.  He  must  learn  the  principal  export  and 
import  organizations  in  his  own  country,  their  types  and  their 
methods  of  operation,  the  workings  of  exchanges,  of  insur- 
ance concerns,  and  of  transportation  lines. 

8.  Foreign  Tirade  Psychology.  By  foreign  trade  psychol- 
ogy is  meant  the  study  of  the  principal  markets  of  the  world 
as  regards  their  structure,  the  character,  temperament,  tend- 
encies, and  usages  of  the  people  whose  desires,  mode  of  liv- 
ing, wants,  and  aspirlations  are  represented  by  the  market  in 
which  they  are  concerned.  This  study  of  conditions  is  usually 
first  carried  on  at  long  range  and  later  followed  up  by  actual 
observations  by  the  student  on  the  ground.  It  should  include 
also  the  psychology  of  sale  by  advertising  and  mail  order. 

9.  Foreign  Trade  Technology.  Foreign  trade  technology 
includes  the  study  of  the  principal  negotiable  products  as  re- 
gards characteristics,  species,  qualities,  and  defects  of  mechan- 
dise.  It  embraces  also  an  analysis  of  the  methods  of  receiving, 
packing,  carriage,  storage,  and  manufacturing  for  export,  and 
of  the  systems  of  ocean  trade  routes  and  land  transportation  in 
the  principal  foreign  countries. 

10.  Banking  and  Finance.  The  theory  of  money  and 
banking  should  be  mastered  and  the  student  should  be  familiar 
with  international  banking,  its  functions  and  operations.    The 


EDUCATION   FOR   FOREIGN   TRADE  217 

workings  of  exchanges,  corporate  finance,  credits,  collections, 
securities,  and  every  practical  detail  of  the  foreign  banking 
business  should  be  thoroughly  studied. 

II.  Practice  in  Foreign  Trade.  Practice  in  foreign  trade 
should  consist  of  frequent  visits — individual  and  group — to 
the  business,  banking,  industrial,  and  other  establishments  en- 
gaged in  foreign  trade  for  the  purpose  of  observation. 

Practical  Experience  in  Foreign  Trade 

In  the  previous  chapter  the  practical  education  in  the  field 
given  the  European  students  of  foreign  trade  was  described. 
There  is  no  reason  why  the  American  exporter  who  has  estab- 
lished himself  abroad  should  not  give  to  each  of  his  young 
men  a  brief  but  valuable  experience  in  his  foreign  branch 
office,  or  even  in  the  selling  field  itself  in  company  with  one 
of  the  older  salesmen,  if  he  can  afford  the  expense. 

If  the  exporter  has  not  yet  reached  the  stage  in  his  opera- 
tions that  permits  him  to  do  this  he  may  still  be  able  to  obtain 
places  for  his  men  with  other  foreign  wholesalers  or  impor- 
ters, and  it  will  profit  him  to  do  so  even  if  he  has  to  pay  their 
salaries  and  expenses  himself. 

The  exporter  may  as  well  realize  that  not  all  of  those  he 
trains  will  be  worth  the  effort.  The  speedy  elimination  of 
those  who  fail  to  show  promise  is  a  kindness  to  them  and  a 
business  necessity  to  the  employer. 

In  conclusion  it  may  be  said  that  perhaps  the  chief  ele- 
ments of  the  future  foreign  trader's  equipment  are,  after  all, 
breadth  of  vision,  a  faith  in  American  ideals  and  traditions, 
and  a  broad  sympathy  with  the  ideals  and  traditions  of  for- 
eigners. Without  these  traits  the  best  planned  equipment  and 
training  will  not  count  for  very  much. 


CHAPTER    XXVI 

THE  EFFICIENCY  OF  THE  ORGANIZATION 

Fundamental  Efficiency  Principles 

The  basic  principles  of  efficiency  which  govern  the  de- 
velopment and  management  of  commercial  organizations  may 
be   stated   briefly   as    follows: 

1.  The  policy  of  the  management  should  be  based  on 

co-operation  with  its  employees  whose  prosperity 
should  balance  that  of  the  employer. 

2.  The  organization  should  be  built  on  the  harmonious 

correlation  of  the  parts  with  the  whole,  the  duties 
and  functions  of  each  employee  being  clearly  de- 
fined and  definitely  known. 

3.  The  principles  of  econom.y  should  be  understood  and 

practiced  so  as  to  attain  an  adequate  equipment 
and  effective  personnel  with  the  least  expense. 

4.  The  organization  should  be  based  on   faith  in  the 

product  and  enthusiasrn  for  the  work. 

The  analogy  between  war  and  business  has  already  been 
pointed  out.  Nowhere  is  this  analogy  more  striking  than  in 
the  matter  of  organization. 

The  efficiency  of  army  organization  is  the  result  of  the 
strict  enforcement  of  the  rigid  scientific  principles  upon  w^hich 
the  structure  of  the  entire  army  is  based.  These  principles 
are,  in  the  order  of  their  importance,  as  follows: 

1.  Clearly  defined  ideals  and  purpose. 

2.  An  unvarying  system  of  responsible  leaders  from  the 

top  down. 

218 


EFFICIENCY    OF   THE   ORGANIZATION  219 

3.  Strong  and  constant  impulse  from  superior  officers. 

4.  Unswerving  loyalty  of  subordinate  officers. 

5.  Thorough  training  of  the  individual  units. 

6.  Intense  esprit  de  corps. 

These  elements  of  successful  organization  are  applicable 
to  any  enterprise  which  aims  to  achieve  the  greatest  possible 
results.  They  constitute  a  working  ideal  towards  which 
every  manager  must  aim. 

Organization 

The  general  form  of  organization  must  differ  according 
to  the  nature  of  the  business.  Experience,  however,  has  shown 
that  a  centralized  type  of  organization  is  best  suited  to  the 
modern  requirements  of  foreign  commerce.  It  is  the  type 
where  individual  arbitrariness  and  usurpation  do  not  exist, 
but  where  all  authority  radiates  from  one  center.  It  is  dele- 
gated from  the  top  down  the  line  to  the  lowest  subordinate, 
but  is  distributed  through  intelligent  co-operation. 

An  illustration  of  a  common  type  of  an  industrial  organ- 
ization is  that  in  which  the  head  of  the  concern  delegates  his 
power  to  his  managers,  they  in  turn  delegate  their  authority 
to  different  superintendents,  the  superintendent  passes  it  to 
the  foreman,  and  so  it  goes  down  the  line  to  the  lowest  "boss." 
The  responsibility  in  each  case  rests  upon  the  person  who 
wields  the  immediate  authority,  although  nominally  at  the  top. 
The  evil  of  this  system  is  that  the  man  at  the  bottom  really 
runs  the  business  and  he  is  usually  the  man  with  the  least 
training  and  knowledge.  It  is  a  system  that  depends  upon 
the  loyalty,  energy,  resourcefulness,  and  ability  of  each  subor- 
dinate head.  If  any  one  of  them,  goes  wrong  the  whole  edifice 
is  endangered. 

The  modern  type  of  organization  of  the  constructive  type 
gathers  all  the  executive  authority  at  the  top,  nominally  in 
the  individual  head,  but  really  in  the  staff  of  specialists  who 


220  OPERATING   THE   ORGANIZATION 

advise  the  individual  head  of  the  concern  and  all  his  subordi- 
nates upon  the  matters  in  their  special  lines  and  who  form  a 
sort  of  general  staff.  In  this  case  the  authority  permeates  the 
entire  structure  and  the  organization  draws  its  impulse  to 
action  from  the  counsel  of  the  specialists  at  the  top. 

The  management,  like  the  organization,  may  be  of  a  single 
or  of  a  double  standard.  If  a  single  standard,  the  export 
activities  are  interwoven  into  the  fabric  of  the  entire  concern 
and  although  there  may  be  a  subordinate  manager  for  the 
foreign  activities  yet  such  a  department  has  no  more  signifi- 
cance than  the  accounting  department.  Under  the  double 
standard  of  organization,  the  export  activities  are  entirely 
sej>arated  from  the  general  business,  in  so  far  as  their  work- 
ings are  concerned.  The  policies  must  of  course,  be  formu- 
lated by,  and  the  source  of  responsibility  vested  in,  the  head 
of  the  concern. 

If  the  business  is  small  and  the  venture  into  the  foreign 
fields  is  experimental,  it  is  of  course  foolish  to  create  a  sep- 
arate export  organization.  The  most  that  is  necessary  in  such 
case  is  to  employ  an  export  manager  and  his  clerical  assis- 
tants. But  when  the  organization  for  the  conduct  of  the 
foreign  sales  of  a  large  concern  is  extensive,  it  is  always  wise 
to  vest  the  export  activities  in  a  separate  department  or  organi- 
zation. The  advantages  overbalance  any  saving  of  overhead 
expenses. 

Specialized  Effort 

It  is  a  dictum  of  modern  science  that  specialized  effort  is 
a  necessary  element  in  every  development  of  a  higher  order. 
Credit  matters,  shipments,  collections,  advertising,  and  even 
production  itself,  in  some  cases,  are  matters  so  radically  dif- 
ferent in  foreign  trade  that,  other  things  being  equal,  these 
differences  alone  justify  a  separate  organization  and  man- 
agement to  handle  it  properly. 


EFFICIENCY    OF   THE   ORGANIZATION  221 

The  active  head  of  the  entire  organization  should  never 
delegate  his  responsibiHty  for  foreign  work  entirely  to  the 
head  of  the  export  department.  If  he  does  this  the  export 
department  becomes  practically  a  distinct  organization.  As  a 
rule,  separate  export  organizations  are  created,  not  because 
they  will  be  productive  of  greater  efficiency,  but  rather  for 
financial  reasons,  especially  when  several  independent  concerns 
co-operate  for  a  joint  exploitation  of  foreign  fields.  In  such 
cases  this  kind  of  organization  has  a  distinct  advantage. 

Formulation  of  General  Policies 

The  management  of  every  undertaking  should  have  its 
general  policies  reduced  to  writing  and  made  known  to  the 
employees;  this  is  particularly  advisable  in  foreign  trade,  be- 
cause of  its  greater  complexity. 

It  should  also  be  made  clear  to  the  salesmen  and  other 
representatives  of  the  concern  that  it  is  the  fundamental  policy 
of  the  house  to  give  the  customers  what  they  want  and  not 
what  the  representative  thinks  they  should  have.  This  nat- 
urally tends  to  cure  overzealousness  on  the  part  of  the  selling 
force. 

Handling  Salesmen 

The  main  trouble  with  sales  organizations  is  usually  the 
breaking  down  of  the  sales  force.  The  salesman  may  secure 
a  better  position  elsewhere,  he  may  go  into  business  for  him- 
self, or  he  may  become  ill.  It  more  frequently  happens,  how- 
ever, that  he  fails  to  make  good  and  as  a  result  becomes  dis- 
couraged and  abandons  his  position.  There  is  one  way  and 
only  one  to  guard  against  the  disease  of  discouragement,  and 
that  way  is  to  keep  up  to  a  certain  standard  of  efficiency  in 
all  things,  business  and  personal. 

According  to  some  writers,  sales  efficiency  is  the  resultant 
of  the  salesman's  appearance,  knowledge  of  the  goods  he  sells, 


222  OPERATING   THE   ORGANIZATION 

fluency  of  language,  knowledge  of  human  nature,  general 
Information,  jovial  disposition,  physical  strength  and  endur- 
ance, adaptation,  ingenuity,  etc.  The  sum  of  these  qualities 
makes  success. 

It  would  seem,  however,  that  something  else  should  be 
added  which  is  equal  to  all  these  elements  put  together,  and 
this  is  the  state  of  mind  of  the  salesman — the  disposition  to 
push  on  and  on  and  on  until  he  conquers  and  wins  permanent 
success.  Morale  is  as  necessary  to  the  salesman  as  to  the 
soldier. 

A  man  is  a  very  small  man  if  he  is  mainly  physical.  The 
greatest  part  of  his  manhood  is  his  mental  make-up,  his  tem- 
perament, his  psychological  status.  It  is  far  more  sensitive 
and  far  more  easily  put  out  of  gear  than  his  physical  make-up. 
We  are  all  creatures  of  our  temperaments  and  many  a  good 
salesman  has  been  demoralized  by  a  poor  sales  manager.  Dis- 
cipline is  necessary  in  every  organization,  but  a  wise  manager 
knows  how  to  distinguish  between  a  commercial  and  a  military 
system  of  discipline.  He  will  refrain  himself,  and  will  prohibit 
his  subordinates  from  employing  any  bullying  or  driving  tac- 
tics which  can  only  result  in  degrading  the  employee  and 
making  him  disgusted  with  the  management. 

The  Manager's  Duty — Inspiration 

Except  in  a  business  employing  a  low  grade  of  men,  arro- 
gance on  the  part  of  the  management  has  never  been  found 
to  be  a  commercial  asset.  That  manager  is  the  best  who  can 
win  his  subordinates'  personal  confidence  and  who  can  inspire 
them  to  greater  exertions  by  such  means  as  are  known  to  (all 
leaders  of  men.  It  is  because  an  important  part  of  a  man- 
ager's duties  is  to  inspire  the  men  under  him  that  it  is  a  bad 
policy  to  put  a  man  in  the  position  of  control  who  is  not  espe- 
cially qualified  for  his  work  both  by  nature  and  training. 
Yet  this  procedure  is   frequently  adopted   by  the  heads   of 


EFFICIENCY   OF  THE   ORGANIZATION  223 

large    undertakings,    and    the    policy    almost    always    means 
failure. 

In  foreign  work,  where  it  is  necessary  for  the  salesman 
to  be  far  from  home  and  friends,  in  a  strange  land,  among 
strange  people,  this  factor  of  executive  inspiration  is  of  great 
psychological  significance.  Needless  to  say,  the  manager  and 
his  field  workers  should  not  only  be  personally  acquainted  but 
should  be  on  the  closest  terms  of  intimacy  compatible  with 
discipline  and  nianagcrial  dignity. 

Liberal  and  Fair  Treatment 

Salesmanship  in  far-off  foreign  countries  is  often  a  very 
trying  task  but,  as  more  and  more  foreign  territories  become 
developed,  the  reward  of  successful  work  is  correspondingly 
larger,  both  for  the  salesman  and  for  the  house.  It  pays  the 
manager  to  be  liberal  and  even  generous  with  his  representa- 
tives abroad.  As  a  matter  of  fact,  generosity  toward  the  sales- 
man has  been  usually  found  to  be  the  best  possible  invest- 
ment in  view  of  the  fact  that  selling  is  the  vital  work  indis- 
pensable to  the  life  of  every  enterprise. 

Generosity  is  not  merely  a  matter  of  money,  but  of  rela- 
tionship and  methods  of  handling.  The  management  may 
perhaps  encourage  the  employees  to  spy  upon  each  other  re- 
garding their  demeanor  or  their  attitude  tow/ard  the  con- 
cern. This  is  a  very  poor  policy.  It  creates  an  atmosphere  of 
suspicion,  destroys  the  esprit  de  corps,  and  makes  the  em- 
ployee who  discovers  the  espionage  disgusted  with  every- 
body, to  the  impairment  of  his  future  efficiency  and  useful- 
ness. 

Keeping  in  Touch 

Every  foreign  trade  manager  should  have  some  system 
which  will  keep  him  in  close  touch  with  his  salesmen  abroad, 
not  alone  receiving  reports  from  the  latter,  but  from  time  to 


224  OPERATING   THE   ORGANIZATION 

time  sending  them  a  word  of  cheer  and  encouragement.  It 
never  pays  to  spare  the  stenographer  at  the  expense  of  the 
salesman.  Hence  the  stereotyped  letter  patterned  to  fit  all 
men,  and  all  occasions,  should  be  sparingly  used  in  corre- 
spondence with  salesmen  in  foreign  fields. 

A  manager  who  quarrels  with  salesmen  in  correspond- 
ence is  not  fit  for  any  kind  of  executive  position.  He  does 
not  know  the  first  principle  of  a  manager's  business,  which  is 
the  management  of  men  so  as  to  secure  from  them  the  maxi- 
mum of  enthusiastic  co-operation  in  the  work  at  hand.  This 
effect  is  never  secured  by  petulant  fault-finding  or  abusive  cor- 
respondence. 


CHAPTER    XXVII 

SELLING  METHODS  IN  FOREIGN  TRADE 

Adaptability  of  Selling  Methods 

The  people  of  every  nation  have  their  peculiarities  and 
distinctive  needs  determined  by  the  country's  location,  its 
natural  resources,  its  environment,  the  character  of  its  popu- 
lation, and  many  other  fixed  conditions.  The  methods  of 
trade  in  each  country  are  as  different  as  the  conditions  which 
govern  them.  No  general  plan  of  sales  campaign  can  be 
formulated  which  would  be  applicable  to  every  country  and 
every  case. 

The  Germans  were  successful  in  foreign  trade,  because 
they  recognized  the  principle  of  commercial  adaptability, 
whereas  some  English  and  American  exporters  still  hold  to 
the  idea  that  what  is  good  in  their  own  country  should  be 
good  everywhere.  This  principle  cannot  be  maintained 
against  intelligent  competition.  The  sooner  our  exporters 
recognize  the  law  of  commercial  adaptation  the  better  for 
them. 

Selling  Methods  Must  Conform  to  Custom 

The  people  of  the  United  States  have  been  accustomed 
to  do  things  in  a  hurry.  They  have  learned  to  value  speed 
and  to  count  time  as  a  monetary  asset.  They  do  not  realize 
that  speed  frequently  degenerates  into  haste  and  that  head- 
long hurry  sometimes  means  repentance  at  leisure. 

For  example,  an  American  company  heard  that  there  was 
a  great  opportunity  in  its  line  in  South  America.  Forthwith 
the  manager  of  the  company  picked  out  his  best  salesman, 

225 


226  OPERATING    THE    ORGANIZATION 

noted  for  quick  work,  and  sent  him  down  on  the  first  steamer. 
The  salesman  had  no  experience  in  foreign  trade.  He  looked 
at  the  map  and  decided  upon  the  towns  that  were  to  supply 
his  golden  harvest,  and  upon  the  length  of  time  that  he  would 
spend  in  each.  He  allowed  two  days  to  the  smaller  towns  and 
a  week  to  the  larger  ones.  He  arrived,  hurried  his  sample 
trunks  ashore  at  the  first  port,  and  spread  out  his  wares  at 
the  best  hotel.  Next  he  called  on  the  local  dealers  and  in- 
vited them  to  look  at  his  samples,  announcing  at  the  same 
time  that  his  steamer  was  to  leave  in  two  days  and  that  he 
had  to  go  with  it.  To  his  great  astonishment  no  one  responded 
to  his  invitation.  He  waited  another  day  but  with  no  better 
results.  He  concluded  that  this  time  he  had  struck  a  dead 
town. 

When  he  disembarked  at  his  next  landing  he  repeated 
the  performance,  but  with  the  same  results.  Then  he  called 
again  on  the  local  merchants  and  urged  them  not  to  lose  the 
great  opportunity  of  inspecting  his  stock.  But  the  mer- 
chants did  not  seem  to  appreciate  their  opportunity.  Again 
they  failed  to  appear,  in  spite  of  the  fact  that  the  sales- 
man had  pointed  out  to  them  the  deficiencies  in  their  stock. 
The  entire  trip  of  this  energetic  pioneer  brought  no  appre- 
ciable results  and  the  concern  became  convinced  that  the 
South  Americans  were  uneducated  in  modern  business  ways, 
and  impervious  to  knowledge. 

It  so  happened  that  a  few  days  later  this  American  sales- 
man was  followed  by  a  representative  of  a  European  house 
in  the  same  line  of  trade.  He  came  with  letters  of  intro- 
duction, which  he  sent  to  the  merchants  soon  after  his 
arrival.  Later  he  made  personal  calls  on  them,  looked  over 
their  stores,  and  expressed  his  admiration  for  the  way  in 
which  they  were  conducting  their  afifairs.  The  merchants 
returned  his  call  and  the  salesman  established  with  all  of  them 
a  basis  of  friendly  intercourse.     He  continued  his  casual  call* 


SELLING   METHODS   IN   FOREIGN   TRADE  227 

until  in  a  day  or  so  they  began  to  show  curiosity  as  to  the  sort 
of  merchandise  he  was  handhng.  To  this  he  repHed  that  if 
they  wished  to  see  his  stock  he  would  be  glad  to  exhibit  it  to 
them  at  their  convenience,  but  at  present  he  was  not  in  a  hurry 
to  sell  them  anything.  Such  methods  strongly  appealed  to 
their  Latin  temperament  and  before  he  left  m.any  of  the  mer- 
chants gave  him  large  orders.  He  did  the  same  thing  in  the 
other  towns,  staying  in  each  from  four  to  five  days  longer  then 
did  our  American  friend,  but  selling  freely  where  the  Ameri- 
can sold  not  at  all. 

The  American  went  into  the  strange  land  prepared  to  do 
a  large  amount  of  business  in  a  hurry  and  rush  out  again,  all 
with  no  method  of  procedure.  The  European  knew  the  people, 
knew  how  to  approach  and  how  to  win  them,  and  above  all 
he  went  there  with  a  preconceived  plan  of  action. 

The  coercive  attitude  toward  a  customer  is  seldom  con- 
ducive to  success  anywhere,  :and  it  is  fatal  with  a  people  of 
an  emotional  temperament. 

Suiting  Methods  to  Conditions 

The  fundamental  rule  of  trade  in  foreign  lands  is  to  study 
the  people  and  their  ways  and  adapt  oneself  to  them.  In 
China,  for  instance,  all  foreign  business  must  be  transacted 
through  an  intermediary.  In  Russia  before  the  Great  War, 
large  sales  could  not  have  been  made  without  establishing 
oneself  socially. 

In  some  countries  the  distribution  in  certain  lines  of  mer- 
chandise is  monopolized  by  small  groups  of  houses.  There 
are  still  countries  where  bargaining  prevails  and  in  such  cases 
it  is  necessary  to  demand  higher  prices  than  those  for  which 
one  is  willing  to  sell.  In  each  case  a  special  method  must  be 
devised  for  securing  the  distribution  and  influencing  sales. 

Foreign  houses  generally  give  their  salesmen  a  great  deal 
of  latitude  and  authority  in  dealing  with  a  new  customer. 


228  OPERATING   THE   ORGANIZATION 

They  are  authorized  to  ^accept  credit  in  cases  in  which  it  seems 
to  them  advisable,  to  arrange  the  details  of  shipment  and  to 
offer  such  guarantees  as  may  be  required.  As  a  general  rule 
it  is  a  good  policy  to  empower  salesmen  to  meet  any  emergen- 
cies, as  overseias  communications  are  expensive,  slow,  and 
unsatisfactory. 

Often  what  is  at  home  called  "persistence"  is  construed 
abroad  as  importunity  and  instead  of  being  fruitful  of  results 
it  is  likely  to  be  feelingly  resented.  Of  course  this  has  no 
reference  to  the  pressure  which  is  exerted  continuously  but 
gently  with  a  nice  regard  to  the  prospects  feelings.  Persis- 
tence is  a  valuable  quality  to  possess  and  to  exercise,  but  in 
selling  wares  abroad  it  has  to  be  used  sparingly,  at  longer 
intervals,  and  in  ways  requiring  ingenuity  and  diplomacy 
rather  than  push. 

The  Leisurely  Approach 

An  obvious  difference  between  the  American  and  European 
selling  methods  is  that  the  European  places  greater  reliance  on 
friendship  and  sociability  than  does  the  American.  The 
European  will  not  generally  do  business  with  the  man  he  has 
not  met,  at  least  in  a  semisocial  way. 

The  quality  which  renders  the  American  salesm'an  invinc- 
ible at  home  is  his  self-hypnotism  which  makes  him  a  glowing 
enthusiast.  Enthusiasm  being  contagious  he  spreads  it  wher- 
ever he  goes  and  in  time  it  captures  his  prospect.  The  Euro- 
peans are  for  the  most  part  little  subject  to  autosuggestion 
in  trade  matters.  They  are  neither  hypnotizers  nor  can  they 
easily  be  hypnotized.  They  regard  trade  as  a  necessary  evil 
which  supplies  them  with  life's  comforts,  not  as  a  thing  of 
any  interest  in  itself.  Their  enthusiasm  runs  rather  in  the 
direction  of  getting  the  most  enjoyment  out  of  life  than  in 
buying  and  selling  goods. 

Generally  speaking,  business  people  in  foreign  countries 


SELLING   METHODS   IN   FOREIGN   TRADE  229 

take  life  easily,  and  although  money  has  a  charm  for  them, 
it  is  not  desired  at  the  sacrifice  of  ease  or  of  pride.  He  who 
wishes  to  succeed  with  them  must  choose  to  succeed  leisurely 
and  to  conform  otherwise  to  their  ways.  If  the  foreigner's 
nature  or  custom  is  to  be  slow,  it  is  his  privilege,  and  there 
is  no  profit  in  quarreling  with  his  ways.  He  may  be  alto- 
gether wrong  in  taking  life  so  easily,  but  what  a  waste  of 
time  it  is  to  try  to  reform  him.  Absurd  as  it  seems,  a  great 
many  American  business  men,  not  content  to  complain  of 
the  ways  of  the  foreigner,  try  to  force  him  to  adopt  the  Ameri- 
can business  ways  and  methods.  It  is  certainly  a  vain  effort 
at  reform  and  it  is  one  which  a  practical  man  should  dis- 
dain. 

It  is  well  to  bear  in  mind  this  difference  between  foreign 
and  American  methods  and  to  remember  that  the  foreigner 
will  not  trade  in  haste,  and  generally  cannot  be  convinced  at 
the  first  interview.  Foreign  orders  come  in  large  quantities, 
and  a  customer  once  secured  is  oftentimes  a  customer  for 
life.  It  pays  to  be  contented  to  wait  until  he  is  ready  to  do 
business. 

Methods  for  Promoting  Foreign  Trade 

The  methods  for  promoting  foreign  trade  are  national,  co- 
operative, general,  or  special.  When  a  country  devises  means 
of  assisting  its  people  in  their  commerce  abroad  through  di- 
plomacy or  other  means,  it  should  have  a  method  or  policy  to 
that  end.  When  two  or  more  concerns  join  to  do  business  in 
a  foreign  country  they  must  have  a  method  which  is  essen- 
tially co-operative.  Every  concern  entering  a  given  foreign 
field  usually  has  a  general  preconceived  way  or  method  of 
reaching  the  market  and  of  securing  and  keeping  customers. 
Special  methods  of  sale  or  for  overcoming  competition  are 
invented  to  suit  the  exigencies  of  the  special  occasion,  and  it 
is  best  to  leave  them  out  of  the  general  plan  of  sale  and  trust 


230  OPERATING   THE   ORGANIZATION 

to   the  ingenuity  and   resourcefulness  of  the  salesman    for 
their  application. 

A  special  method  hastily  devised  to  conquer  an  unfore- 
seen obstacle  may  be  illustrated  by  the  experience  of  a  sales- 
man who  went  to  Russia  for  the  purpose  of  securing  a  large 
contract  for  a  special  kind  of  electrical  bulb.  On  arriving 
at  his  destination  he  found  that  a  British  firm  was  ahead  of 
him,  and  although  the  contract  had  not  yet  been  closed,  he 
could  not  secure  a  hearing  from  the  officials  who  had  the 
matter  in  charge.  He  then  conceived  the  idea  of  showing 
them  his  goods  in  an  unusual  way.  Through  some  friends 
he  invited  the  officials  of  the  concern  to  an  elaborate  dinner. 
At  a  given  signal  the  lights  of  the  dining-room  were  put  out 
and  another  set  of  lights,  equipped  with  his  own  bulbs,  were 
turned  on  displaying  a  startling  difference  and  accentuating  the 
superiority  of  the  bulbs  he  had  for  sale  over  those  of  his 
competitor.  The  salesman  then  explained  to  the  surprised 
officials  that  he  did  not  wish  to  leave  their  town  without  ac- 
quainting them  with  the  excellence  of  the  goods  he  car- 
ried. Since  his  proposition  was  meritorious  on  the  face  of 
it,  his  unusual  method  of  displaying  his  wares  brought  him 
complete  success  and  his  trip  resulted  in  a  large  order. 

Competitors'  Methods 

Before  deciding  upon  a  method  of  sale  a  good  rule  to 
follow  is  to  study  not  only  the  people  with  whom  one  is  to 
trade,  but  also  the  methods  employed  by  successful  competi- 
tors. No  matter  what  method  is  chosen  it  should  have  due 
regard  to  the  important  elements  which  enter  into  every  sell- 
ing campaign  and  which  together  constitute  and  contain  the 
principles  of  foreign  trade.  These  elements  are  as  follows: 
adaptation,   reciprocity,  veracity,  diplomacy,  and  tact. 

The  commercial  aspects  of  adaptation  and  of  reciprocity 
in  the  world's  trade  have  already  been  considered.     Veracity 


SELLING   METHODS   IN   FOREIGN   TRADE  231 

is  not  used  here  in  the  sense  of  merely  being  truthful  and 
never  misrepresenting  things.  It  means  much  more  than 
that;  it  is  the  maintenance  of  the  integrity  of  the  trading 
concern  at  all  costs  and  at  all  times  and  places  and  to  all  people 
equally. 

Trade  diplomacy  is  practiced  in  the  Anglo-Saxon  world 
chiefly  in  large  transactions  in  which  principals  trade  in  per- 
son. With  salesmen  it  is  not  even  of  secondary  considera- 
tion. But  tact  is  of  the  greatest  importance  in  foreign  trade, 
whether  the  deal  is  between  the  principals  or  between  their 
representatives.  In  America  push  and  persistence,  even  when 
bordering  on  impertinence,  find  many  an  admirer  who  will 
give  an  order  to  the  fellow  that  tries  the  hardest.  Abroad, 
trading  people  stand  more  on  their  dignity  and  may  resent 
even  a  hearty  handshake.  Diplomacy  with  these  imperturb- 
able foreigners  means  courtesy,  tact,  extreme  consideration 
of  the  feelings  of  others,  and  above  all  things  sympathy  and  re- 
spect for  his  susceptibihties.  He  who  understands  the  value  of 
tact  and  diplomacy  is  bound  to  succeed,  no  matter  what  he 
sells  nor  where  he  sells  it. 


CHAPTER   XXVIII 

SUGGESTIONS  FOR  INTERNATIONAL 
SALESMEN 

The  International  Salesman 

The  international  salesman  should  be  more  mature  in  years 
and  sounder  in  judgment  than  the  prevailing  domestic  type. 
He  should  have  a  more  extensive  general  knowledge  of  the 
world.  His  manners  should  be  cultivated  and  be  adapted  to 
the  particular  type  of  customer  in  hand. 

His  poise  should  be  good.  There  should  be  no  vehe- 
mence in  his  manner  of  approaching  his  customers  but  on 
the  contrary,  the  most  studied  formality,  especially  in  the 
closing  of  the  sale.  He  should  have  a  social  temperament 
and  enjoy  the  entertaining  of  his  prospective  customers,  with- 
out letting  it  be  too  apparent  that  he  does  it  for  business 
reasons.  He  should  be  in  appearance  all  that  his  talk  and 
his  actions  convey  that  he  is. 

Aggressive  Salesmanship 

Some  people  think  that  aggressive  salesmanship  means 
an  arrogant,  boorish,  dictatorial  attitude  toward  the  cus- 
tomer with  an  occasional  display  of  bulldozing  tactics.  This 
is  never  at  any  time  advisable  even  in  domestic  salesmanship, 
and  certainly  not  in  the  foreign  field.  There  are  instances 
when  a  man  will  buy  because  he  is  driven  to  it,  but  they  are 
rare  and  it  is  wiser  for  a  salesman  never  to  try  to  scare  a  pros- 
pective customer  into  giving  an  order.  Those  who  act  on 
the  principle  that  more  flies  are  caught  with  honey  than  with 
vinegar  will  invariably  do  the  better.     The  truly  aggressive 

232 


SUGGESTIONS   FOR   SALESMEN  233 

salesman  hustles  for  business  from  eight  to  ten  hours  a  day. 
He  will  even  teach  himself  to  smile  at  rudeness,  and  he  will 
never  let  anything  so  small  as  a  refusal  deter  him  from  trying 
again.    But  he  must  try  in  the  right  way. 

A  salesman  who  after  an  unsuccessful  call  on  a  number 
of  dealers  goes  to  his  hotel  and  prepares  to  leave  for  his 
next  stopping  place  before  having  thoroughly  canvassed  the 
local  situation  is  not  an  aggressive  salesman,  and  lacks  the 
essential  quality  of  persistency. 

But  even  persistence  has  its  limits.  One  must  never  annoy 
a  customer;  a  little  patient  waiting  and  a  friendly  attitude 
will  yield  far  better  results.  It  is  certainly  not  business 
aggressiveness  to  become  angry  or  to  enter  into  a  controversy 
with  the  customer.  Such  conduct  is  unpardonable,  and  espe- 
cially so  from  the  foreigner's  point  of  view. 

One  must  be  a  philosopher  to  get  along  in  this  world. 
Successful  men  are  usually  kind,  good-natured,  even-tem- 
pered, and  tolerant  of  the  faults  in  others.  He  who  wishes  to 
be  a  prince  among  men  should  know  by  heart  the  qualities 
of  human  kindness. 

The  quality  called  aggressiveness  in  a  commercial  sense 
has  its  varied  applications.  Sometimes  it  is  physical  persist- 
ence, sometimes  it  is  concentration,  and  sometimes  it  is  prac- 
tical ingenuity.  The  writer  has  known  very  successful  sales- 
men in  the  domestic  field  who  rarely  called  on  a  customer  in 
large  cities  without  first  getting  in  touch  with  him  on  the 
telephone.  On  arriving  in  town  he  would  call  up  a  number 
of  prospects,  a  short  talk  determining  which  ones  he  should 
see  first.  Later,  he  would  call  up  those  he  had  not  yet  seen 
and  announce  that  he  was  likely  to  leave  town  and  that  he 
hoped  to  call  as  he  had  something  extraordinary  to  offer. 
Then  again  he  would  decide  on  whom  he  should  call  until 
ultimately  he  would  see  all  of  them  and  generally  leave  town 
loaded  with  orders. 


234 


OPERATING   THE   ORGANIZATION 


Overcoming  Customers'  Excuses 

One  of  the  greatest  difficulties  the  salesman  has  to  over- 
come is  the  customers'  excuses.  He  becomes  tired  of  hearing 
such  expressions  from  the  dealers  as  the  foreign  equivalents 
of  "nothing  doing,"  "loaded  to  the  brim,"  "have  plenty  of 
that  in  stock,"  "have  just  replenished  my  stock,"  and  similar 
expressions  ad  infinitum.  It  is  not  altogether  the  salesman's 
duty  to  overcome  these  excuses,  for  a  wise  sales  manager 
should  provide  a  means  of  unloading  the  dealer's  shelves  as 
well  as  for  filling  them.  The  salesman  should,  however,  be 
able  to  explain  these  means  by  convincing  him  that  the  sales- 
man is  just  as  interested  in  seeing  the  goods  quickly  pass  over 
his  dealer's  counter  as  he  is  in  landing  them  on  his  shelves. 

No  first  class  salesman  depends  on  the  house  to  furnish 
him  with  all  the  means  of  overcoming  the  buyer's  excuses. 
He  has  his  own  resources.  He  remembers  that  reciprocity  is 
the  first  principle  of  commercial  life.  If  you  do  something 
for  a  man,  he  is  more  likely  to  do  something  for  you.  When 
the  customer  says  he  is  "loaded  to  the  brim,"  he  may  or  may 
not  be  telling  the  truth.  The  salesman  should  then  ask  him 
as  a  favor  to  inspect  the  line  of  samples  carried  or  some 
selected  portion  of  them,  telling  him  something  of  interest 
in  regard  to  them — something  new. 

While  displaying  the  samples  it  can  readily  be  seen  by  the 
interest  the  customer  takes  whether  he  was  truthful  or  not  in 
his  statement.  At  the  same  time  the  real  state  of  affairs 
should  be  ascertained  and  if  possible  an  offer  to  help  him  may 
diplomatically  be  made.  It  may  be  that  he  does  not  display 
his  merchandise  properly,  or  his  sales  force  or  sales  methods 
are  wrong,  or  perhaps  he  does  not  buy  as  he  should.  Perhaps 
he  fails  to  turn  stocks  often  enough  or  his  lines  and  brands 
are  not  of  standard  value  and  are  not  properly  mixed.  A 
suggestion  from  the  salesman  may  in  any  such  case  be  of 
material  value  to  the  prospective  customer. 


SUGGESTIONS   FOR   SALESMEN  235 

Offering  Suggestions 

To  be  able  to  offer  suggestions  successfully  the  salesman 
should  learn  something  of  general  merchandising;  but — most 
important  of  all — he  should  make  every  effort  to  show  a  real 
interest  in  his  customer's  success.  Thus  the  principle  of  reci- 
procity will  begin  to  operate  and  the  customer  will  begin  to 
feel  a  desire  to  do  something  in  turn  for  the  salesman  when 
he  sees  that  the  latter  is  really  interested  in  doing  something 
for  him  besides  merely  selHng  him  goods. 

The  right  kind  of  a  salesman  will  secure  the  loyalty  of  his 
customer  by  himself  being  loyal  and  showing  a  willingness 
to  be  of  real  service.  As  a  rule,  any  man  is  willing  to  be 
shown  how  he  can  make  more  money,  but  this  must  be  done 
tactfully  and  in  the  kindest  possible  way.  The  customer's 
welfare  means  the  salesman's  welfare.  As  the  one  succeeds 
so  will  the  other  succeed. 

Often  it  may  be  best  to  offer  assistance,  or  give  advice 
before  displaying  samples  or  endeavoring  to  approach  the 
subject  of  sales.  This  is  especially  true  when  the  buyer 
appears  to  be  unapproachable.  Tact  is  never  wasted  when 
dealing  with  the  foreign  buyer.  It  is  one  of  the  most  valuable 
assets  which  the  salesman  can  possess.  A  compliment  on 
the  customer's  goods,  his  manner  of  displaying  them,  or  his 
taste  in  selection,  at  the  same  time  offering  some  little  hint 
or  suggestion — and  his  interest,  friendship,  and  patronage 
are  won. 

Keeping  a  Customer 

Sometimes  it  is  easier  to  get  a  customer  than  to  keep  him, 
but  it  is  just  as  important  to  keep  the  old  customers  as  to  get 
new  ones.  There  are  many  ways  of  losing  them.  Misrep- 
resentation is  the  most  common  way.  The  salesman  in  his 
anxiety  to  sell  oftentimes  quite  unconsciously  makes  state- 
ments which  cannot  be   sustained   and  which   his  employer 


236  OPERATING   THE   ORGANIZATION 

would  never  authorize.  When  the  customer  finds  out  that 
he  was  practically  cheated  he  tells  others  and  both  the  sales- 
man and  his  house  sufifer. 

Customers  are  lost  by  taking  it  for  granted  that  once  a 
customer  is  always  a  customer  and  by  failing  to  give  a  man 
as  much  attention  on  a  later  occasion  as  when  he  made  his 
first  purchase.  An  old  customer  is  entitled  to  even  better 
treatment  than  the  new  one.  It  may  be  human  to  become  in- 
different to  what  one  possesses,  but  it  is  poor  business. 

A  successful  salesman  should  be  able  to  know  the  mind 
of  his  customer.  The  golden  rule  is  a  good  business  rule. 
If  the  salesman  will  think  what  he  would  do  were  he  in  his 
customer's  place  he  will  know  when  to  act  and  what  to  do. 

Like  honesty,  courtesy  always  pays.  If  an  old  customer  is 
treated  as  an  old  friend  he  will  always  remain  a  customer 
(unless  there  is  something  radically  wrong  with  the  goods) 
and  even  become  an  advertiser.  Those  who  hold  their  old 
customers  are  most  likely  to  win. 

People  are  like  the  lower  animals — they  run  after  those 
who  feed  them.  Most  people  are  hungry  for  human  sympathy 
and  much  can  be  accomplished  with  a  cheerful  smile.  Some 
people  have  built  their  fortunes  on  a  hearty  hand-shake  backed 
by  a  smile.  Think  of  these  things  when  meeting  an  old  cus- 
tomer and  the  chances  of  winning  will  be  vastly  increased. 

Approaching  a  Prospect 

The  start  and  the  finish  are  the  two  most  difficult  stages. 
At  these  times  one  must  be  an  adept  to  be  perfectly  at  ease. 
Many  salesmen  are  not.  Men  are  invariably  averse  to  stran- 
gers and  it  is  exceptional  for  a  stranger  to  be  able  to  walk 
into  an  office  and  attempt  to  sell  his  proposition  to  another 
stranger  without  creating  at  first  the  unfavorable  impression 
which  frequently  is  the  lasting  impression. 

The  problem  then  first  of  all  is  how  to  create  a  'favorable 


SUGGESTIONS   FOR   SALESMEN  237 

impression  on  approaching  a  prospective  buyer.  This  is  a 
particularly  important  problem  for  an  international  sales- 
man. Of  course  a  neat  appearance  helps  a  good  deal  but  it  is 
not  everything.  More  important  is  what  the  salesman  says, 
how  he  says  it,  how  he  acts — in  other  words,  how  he  breaks 
in  upon  the  stranger. 

As  a  rule  it  is  well  to  put  in  as  much  time  as  possible  in 
getting  on  a  friendly  basis  before  attempting  to  talk  business. 
Generally  very  few  men  become  rude  when  they  know  "what 
it  is  all  about."  And  if  the  salesman  succeeds  in  establishing 
a  friendly  basis,  it  is  then  a  simple  matter  to  make  a  sale. 

To  jump  upon  the  stranger,  like  a  hurricane,  and  to 
attempt  to  make  a  sale  without  any  preliminaries  is  fatal  in 
foreign  trade. 

A  successful  international  salesman  told  the  writer  that 
when  calling  on  a  customer  he  first  asks  him  about  business 
in  general,  making  his  prospect  feel  that  he  is  the  first  one  on 
whom  he  has  called,  and  that  his  call  is  the  chief  reason  Avhy 
he  came  to  the  town.  When  the  salesman  and  the  customer 
have  established  a  cordial  basis,  what  the  French  call  rap- 
prochement, the  business  talk  and  the  exhibition  of  samples 
follow  naturally. 

Not  infrequently  a  salesman  gets  impatient  with  the  cus- 
tomer and  gives  him  up  on  the  theory  that  "there  are  others," 
when  there  is  still  hope  of  making  a  sale.  This  is  a  poor  policy 
and  against  the  principles  of  efficiency  and  business  sense. 
The  time  has  already  been  invested  which,  with  little  more 
effort,  might  be  made  to  pay  returns.  It  is  profitable  to 
remain  with  the  customer  so  long  as  he  is  willing  to  listen. 
When  he  begins  to  argue,  success  is  in  sight.  Even  if  after 
spending  some  time  on  him  he  bids  the  salesman  "good-bye," 
with  the  positive  indication  that  he  won't  buy,  it  still  may  be 
well  for  the  latter  to  invent  an  occasion  to  see  him  again 
before  leaving  the  town. 


238  OPERATING   THE   ORGANIZATION 

Closing  a  Sale 

Closing  a  sale  is  the  most  difficult  part  of  a  salesman's 
task.  Many  men  are  good  talkers  and  can  interest  a  customer, 
but  comparatively  few  are  good  closers. 

If  the  customer  knows  just  what  he  wants,  when  he  wants 
it,  and  how  much  he  needs,  there  should  be  no  difficulty  in 
closing  a  sale.  Usually,  however,  the  buyer  is  not  sure  on 
one  or  more  of  these  points.  Here  the  salesman  should  help 
him.  Every  buyer  has  that  human  element  in  him  called 
"hesitation."  It  is  the  salesman's  duty  to  turn  hesitation  into 
decision. 

The  salesman  should  be  liked  by  the  customer  and  should 
make  every  effort  to  that  end  so  that  the  customer  may  be 
placed  in  a  receptive  state  of  mind.  When  that  has  been 
accomplished  the  next  step  is  to  impress  the  customer  with 
the  goods  one  has  to  sell.  It  then  is  largely  a  question  of  the 
foreign  salesman's  discretion  and  tact  to  know  just  when  and 
how  to  close  the  sale.  This  should  be  done  before  the  pro- 
spective purchaser  begins  to  cool  off,  but  at  the  same  time  he 
must  not  be  unduly  hurried. 

When  a  customer  starts  to  explain  his  position  with  a 
view  to  postponing  his  decision,  the  salesman  should  know  that 
the  cooling  off  process  has  set  in  and  instead  of  attempting 
to  close  a  sale,  he  should  again  explain  his  proposition  and 
show  the  merits  of  his  article. 

There  are  two  preliminary  requisites  before  the  customer 
is  completely  prepared  for  the  closing.  One  is  to  have  him 
fully  interested  in  the  proposition,  and  the  other,  to  deter- 
mine just  how  much  can  be  sold  him.  Those  who  sell  goods  in 
small  lots  find  their  greatest  difficulty,  not  in  making  a  sale, 
but  in  selling  a  satisfactory  quantity. 

The  closing  argument  should  contain  some  entirely  new 
point  which  has  not  been  previously  mentioned  and  which 
should  be  urged  with  extreme  earnestness  and  force. 


SUGGESTIONS  FOR  SALESMEN         239 

One  must  know  how  to  use  this  vantage  point  properly. 
Here,  as  in  oratory,  the  contrast  is  the  most  effective.  To 
that  end  the  salesman  must  at  first  use  an  ordinary  conversa- 
tional tone  and  genial  manner  while  showing  the  article  or 
explaining  the  proposition.  When  he  sees  that  the  buyer  is 
ready  for  the  final  attack,  after  he  has  gauged  the  latter's 
state  of  mind  and  already  has  his  answer,  the  salesman  should 
become  intensely  serious  and  urge  the  "vantage  point"  ear- 
nestly but  in  as  few  words  as  possible;  then,  if  his  work  has 
been  well  done,  he  should  get  his  order.  This  is  the  usual 
procedure  employed  by  good  closers  and  proves  very  suc- 
cessful. 

What  Is  Meant  by  Salesmanship  as  an  Art 

Primarily  salesmanship  is  the  man.  But  it  is  not  the  man 
as  a  mere  animal,  not  even  the  man  as  a  thinker;  it  is  the  man 
in  all  his  regalia  as  a  human  being  with  all  that  is  best  in 
him.  That  is,  it  is  the  man  as  father,  friend,  lover,  patron, 
humanitarian,  bread-winner,  and  citizen.  He  must  bring  all 
the  emotions  which  represent  these  designations  into  play. 
That  is  his  art  to  visualize  these  emotions  in  the  buyer.  The 
extent  to  which  he  can  reproduce  them,  within  him-self  and 
make  the  other  party  feel  them,  is  the  measure  of  his 
success. 

Some  men  have  no  strong  emotions,  no  sentiment-s — they 
represent  nothing  but  greed  for  money.  Such  men — suppos- 
ing that  they  are  to  succeed  at  all — must  be  good  actors. 
They  must  convey  the  impression  by  their  acting  that  they 
have  all  the  best  human  attributes,  such  as  sympathy  for  their 
fellow  men,  kindness,  honor,  and  friendship,  or  they  will  fail 

to  sell. 

This  ability  to  display  emotions  through  words  and  actions 
and  to  convey  them  through  the  invisible  power  of  suggestion 
is  the  highest  art  of  salesmanship.     It  establishes  at  once  a 


240  OPERATING   THE   ORGANIZATION 

cordial,  friendly  relationship  between  the  buyer  and  the  seller 
and  begets  the  willingness  of  the  former  to  do  anything 
for  the  latter  that  is  not  directly  injurious  to  his  own  wel- 
fare. 


CHAPTER   XXIX 

FOREIGN  TRADE  BY  MAIL  ORDER 

Status  of  Foreign  Mail  Order  Trade 

Foreign  trade  conducted  by  mail  is  nothing  new.  The  mails 
have  always  been  used  with  greater  or  less  success  in  solicit- 
ing orders,  and  since  the  almost  universal  adoption  of  the 
parcel  post  they  have  provided  the  cheapest,  quickest,  and 
safest  method  of  transportation  for  small  packages.  When 
it  is  considered  that  the  commission  houses  use  the  mails  when- 
ever it  is  possible,  it  is  clear  that  the  aggregate  of  foreign 
business  conducted  entirely  by  mail  is  enormous. 

On  the  other  hand,  the  methods  of  the  great  American 
mail  order  houses  are  not  applicable  to  foreign  trade.  These 
institutions  are  practically  great  department  stores  which  sell 
exclusively  by  mail  everything  that  can  be  purchased  in  the 
largest  stores  of  our  great  cities.  There  is  nothing  to  corre- 
spond to  them  abroad  and  despite  their  great  success  in  the 
domestic  field  their  foreign  business  has,  in  comparison  with 
the  volume  of  their  trade  at  home,  always  been  insignificant. 

The  differences  of  language,  customs,  laws,  tariff  regu- 
lations, and  business  methods  have  all  presented  almost  in- 
superable obstacles  to  their  success  abroad.  But  perhaps  the 
most  serious  handicap  to  the  mail  order  houses  in  attempt- 
ing to  do  business  with  foreign  countries  is  the  distance.  It 
is  exceedingly  difficult  to  build  up  that  strong  bond  of  confi- 
dence and  intimacy  between  the  house  and  its  customers — 
the  chief  asset  of  these  companies — with  a  foreign  people 
speaking  a  different  language,  and  with  no  particular  predi- 
lection for  American  fashions  or  American  merchandise. 

241 


242  OPERATING  THE   ORGANIZATION 

The  Ordinary  Type  of  Mail  Order  House 

Most  manufacturers,  unless  restricted  by  their  contracts, 
follow  the  elastic  policy  of  taking  orders  from  whatever  source 
they  come,  whether  it  be  the  wholesale  dealer,  the  retailer, 
or  the  ultimate  consumer.  Every  house  that  will  fill  direct 
the  retail  order  received  by  mail  is  in  a  sense  a  mail  order 
house.  However,  unlike  the  great  mail  order  houses  discussed 
above,  the  manufacturer  tries  to  avoid  competition  with  the 
dealers  who  handle  his  goods.  He  sells  goods  of  his  own  man- 
ufacture only,  and,  while  he  sells  directly  to  the  customer,  he 
charges  the  regular  retail  market  price  for  the  product  and 
usually  adds  a  charge  for  postage. 

The  manufacturer  may  well  ask  himself  why  he  should 
not  conduct  his  foreign  business  along  similar  lines,  selling 
to  both  dealers  and  consumers  and  soliciting  orders  exclusively 
by  mail  with  no  other  expense  than  that  of  correspondence 
and  advertising. 

Such  a  plan  involves  most  patient  and  persistent  work  and 
a  most  careful  consideration  of  the  manufacturer's  relations 
with  the  local  dealer. 

The  Dealer  and  the  Mail  Order  House 

The  mail  order  house  is  the  natural  competitor  of  the 
dealer.  The  dealer  cannot  be  expected  to  show  enthusiasm 
for  a  method  that  threatens  to  dispense  with  his  services  as 
a  part  of  the  machinery  of  distribution.  At  the  same  time 
it  is  perfectly  possible,  by  allowing  him  a  percentage  on  sales 
in  his  territory  however  such  sales  are  effected,  to  place  him 
on  the  basis  of  an  agent,  and  to  make  him  an  important  factor 
in  educating  the  public  in  the  use  of  the  product  and  in  stim- 
ulating business  all  along  the  line.  But  he  must  be  brought 
to  share  the  manufacturer's  point  of  view  and  to  know  the 
goods  and  how  to  handle  them.    He  must  feel  that  in  serving 


FOREIGN  TRADE  BY  MAIL  ORDER  243 

his  principal  he  is  also  serving  his  own  interests.  The  attrac- 
tive discounts  and  commissions  and  the  assurances  of  increased 
future  business  here  play  their  part. 

It  is  even  possible  that  the  wholesale  dealer  abroad  might 
consent  to  act  as  a  branch  house,  which  would  go  far  towards 
overcoming  the  natural  difficulties  arising  from  the  distance 
and  the  diversity  of  laws,  customs,  and  language.  At  the 
same  time  he  might  act  as  a  depository  for  an  adequate  stock 
of  the  product  and  as  a  center  from  which  advertising  mate- 
rial would  be  distributed  and  to  which  letters  of  inquiry  might 
be  sent. 

But  the  manufacturer  cannot  eat  his  cake  and  have  it 
too.  If  he  depends  on  the  dealer  to  act  as  his  intermediary 
he  may  still  conduct  his  business  entirely  by  mail,  but  he  must 
give  up  his  idea  of  selling  any  great  amount  directly  to  the 
ultimate  consumer.  It  is  unreasonable  to  expect  that  the 
dealer,  be  he  wholesaler  or  retailer,  will  be  a  satisfactory 
agent  in  the  task  of  encouraging  his  customers  to  deal  directly 
with  the  producer.  Whatever  he  may  be  paid  for  his  services 
he  prefers  to  see  his  customers  buying  the  product  over  his 
own  counters. 

Perhaps  after  all,  and  certainly  at  the  outset,  the  greatest 
profit  is  to  be  found  in  dealing  directly  with  the  ultimate  con- 
sumer. It  is  perfectly  possible,  provided  the  manufacturer 
sets  about  it  in  the  right  way. 

If  the  plan  of  building  business  by  mail  is  adopted  there 
are  certain  fundamental  requirements  that  demand  careful 
thought  and  preparation. 

Mail  Order  Advertising 

The  foreign  public  are  more  interested  readers  of  circtilar 
letters  and  of  general  advertising  material  than  are  the  Ameri- 
can public.  They  have  more  leisure  and  they  take  more  time 
in  making  up  their  minds.     While  this  characteristic  works 


2z^4  OPERATING   THE   ORGANIZATION 

both  ways,  it  is  a  distinct  advantage  to  the  advertising  man 
v^^ho  is  eager  to  make  the  most  of  his  opportunities. 

Correspondence  is  the  most  vital  factor  in  all  mail  order 
business.  In  the  foreign  field  the  letters  may  be  longer  and 
must  be  more  ceremonious  and  personal  in  tone  and  appeal 
than  their  American  prototypes — whether  they  are  of  the 
general  promotive  type  or  are  individual,  dealing  with  a  speci- 
fic subject.  The  initial  letter  should  come  from  the  home 
office  in  America,  should  be  carefully  written  in  the  language 
of  the  country  to  which  it  is  sent,  and  if  possible  should  be 
signed  by  the  head  of  the  firm.  Follow-up  letters  should  come 
from  the  local  office  to  which  inquiries  and  replies  should  be 
directed. 

Every  letter  should  show  a  human  interest  in  the  welfare 
of  the  buyer.  Not  until  he  feels  the  writer  has  a  personal 
interest  in  him  will  a  certain  type  of  foreign  customer  in- 
terest himself  in  a  proposition  to  which  he  is  introduced  by 
letter. 

Follow-up  systems  must  be  carefully  planned  with  a  view 
to  the  national  susceptibilities  and  customs  of  each  country. 
The  number  of  such  letters  that  can  profitably  be  sent  depends 
largely  upon  the  habits  and  temperam.ent  of  the  people.  As 
a  rule  it  is  not  safe  to  allow  a  local  agent  to  draft  follow-up 
letters.  They  should  be  sent  him  from  the  home  office  after 
teaching  him  when  and  how  to  send  them  out.  Letters  of 
inquiry  must  necessarily  be  left  to  him  to  answer. 

The  advertising  campaign  must  be  planned  scientifically 
and  timed  to  coincide  with  the  seasonal  demand.  The  ex- 
porter who  endeavors  to  avoid  the  preliminary  personal  sur- 
vey of  the  field  must  call  into  council  an  advertising  expert 
who  is  fully  qualified  to  advise  him  on  matters  of  procedure 
in  his  selected  market.  He  himself  cannot  hope  to  pass  in- 
telligently on  the  value  of  mailing  lists  or  the  methods  and 
manner  of  appeal  or  on  the  terms  of  sale.     All  things  con- 


FOREIGN  TRADE  BY  MAIL  ORDER 


245 


sidered,  suggestions  already  made  about  the  preliminary  pro- 
cedure in  the  chapters  on  trade  strategy  in  direct  selling  applies 
with  equal  force  to  foreign  trade  conducted  by  mail  order 
methods.  The  man  who  elects  to  economize  in  matters  of 
preliminary  preparation  multiplies  his  risks  and  complicates 
his  problems. 

Good  Service 

The  American  mail  order  houses  owe  much  of  their  suc- 
cess to  the  promptness  and  accuracy  with  which  they  fill  orders 
and  to  their  readiness  to  correct  mistakes  and  to  avoid  dis- 
satisfaction. All  efforts  in  this  direction  will  be  multiplied 
for  the  dealer  in  the  foreign  field.  The  delay  in  filling  orders 
suggests  the  desirability  of  a  local  depository  and  office  just 
as  soon  as  the  volume  of  the  business  justifies  it.  Even  then 
the  company  cannot  be  too  careful  in  the  construction  of  its 
office  system,  and  it  must  be  ready  to  permit  the  return,  with- 
out question  or  expense,  of  articles  which  the  purchaser  finds 
to  be  unsatisfactory. 

Credits 

The  manufacturer  must  be  particularly  careful  in  the  mat- 
ter of  credits.  A  mail  order  business  usually  implies  cash  in 
advance.  In  some  foreign  markets  such  terms  will  be  a  handi- 
cap; almost  everywhere  they  are  impractical.  The  customer 
may  well  hesitate  to  send  money  to  a  foreign  concern  of 
which  he  knows  nothing  with  the  certainty  of  having  to  wait 
months  for  his  purchases  and  with  little  or  no  recourse  if 
they  never  arrive. 

A  "cash  on  delivery"  plan  well  worked  out  may  succeed  if 
it  is  accompanied  by  a  schedule  of  discounts,  and  in  many 
cases  no  other  method  will  be  safe.  If  credit  is  to  be  granted 
at  all  it  will  necessitate  having  a  credit  man  on  the  ground. 
In  selling  on  credit  the  claim  should  be  evidenced  by  bills  of 


246  OPERATING   THE   ORGANIZATION 

exchange  or  promissory  notes.  There  should  of  course  be  no 
distinctions  between  customers  in  the  sam.e  country  in  the 
matter  of  prices.  One  discount  system  for  all  is  the  wisest 
rule  in  the  long  run. 

The  Local  Representative 

The  local  representative  would  appear  to  be  essential  to 
any  great  success  by  mail  order  methods  in  the  foreign  field. 
His  chief  function  is  to  serve  as  a  link  between  the  consumer 
and  producer.  He  has  charge  of  the  local  center  of  distribu- 
tion from  which  he  fills  orders  and  sends  out  advertising  mat- 
ter. To  him  letters  of  inquiry  are  sent.  He  may  be  the 
source  of  credit  information  or  even  pass  on  matters  of  grant- 
ing credit. 

One  of  the  most  im.portant  duties  of  such  a  representative 
is  to  supply  his  principal  with  information  bearing  on  the  de- 
mands of  the  local  market  and  the  activities  of  his  competitors. 
Without  this  close  personal  touch  on  the  situation  the  manu- 
facturer is  at  a  disadvantage  over  his  competitors  who  follow 
the  usual  methods  of  distribution. 


CHAPTER   XXX 

ADVERTISING  IN  FOREIGN  TRADE 

Purpose  of  Advertising 

The  ultimate  purpose  of  all  commercial  advertising  is  to 
promote  the  sale  of  goods.  It  is  merchandising  by  means  of 
publicity. 

Not  all  advertising  is  conducted,  however,  with  a  view  to 
the  immediate  sale  of  goods.  A  considerable  portion  of  the 
money  spent  on  advertising  is  invested  to  create  a  favorable 
introduction,  to  cause  the  buyer  to  notice  and  to  understand 
the  character  and  quality  of  the  advertised  article.  Simul- 
taneously he  is  being  educated  in  the  merit  and  value  of  the 
article  so  that  eventually  he  may  acquire  confidence  in  the 
responsibility  of  the  producer  and  the  unvarying  quality  of 
the  product.  By  such  means  a  thorough  understanding  be- 
tween the  buyer  and  the  seller  is  eventually  reached  and  the 
buyer  becomes  a  permanent  customer. 

Another  purpose  of  advertising  is  to  impress  the  name 
or  trade-mark  of  the  article  advertised  upon  the  mind  of  the 
consumer,  so  that  even  though  he  has  no  immediate  need  for 
it,  he  may  be  prompted  to  make  inquiries  which  may  be  fol- 
lowed by  a  trial  order.  This  process  in  course  of  time  results 
in  a  well-defined  demand  for  the  article  represented  by  the 
trade-mark. 

To  achieve  the  final  purpose  of  advertising — the  promo- 
tion of  the  largest  number  of  sales  of  the  articles  advertised 
— requires  the  closest  attention  to  the  principles  which  gov- 
ern the  scientific  merchandising  of  salable  commodities  both 
at  home  and  abroad. 

247 


248  OPERATING  THE   ORGANIZATION 

Adapting  the  Advertisement  to  Conditions 

Every  advertisement  should  be  planned  with  a  view  to  the 
article  to  be  sold,  the  market  in  which  it  is  sold,  and  the 
method  of  merchandising  employed  in  its  distribution.  The 
actual  merchandising  begins  with  the  determination  of  the 
quality  and  cost  of  the  article.  Once  these  have  been  settled 
upon  to  the  satisfaction  of  the  seller  he  is  face  to  face  with 
the  market,  which  he  must  study  and  learn  thoroughly.  He 
must  know  the  avenues  of  distribution  and  the  machinery 
through  which  it  is  conducted,  before  he  is  ready  to  consider 
the  nature  of  his  advertising  campaign. 

While  the  fundamental  principles  of  purchase  and  sale 
in  foreign  trade  are  identical  with  those  in  domestic  trade,  the 
systems  of  distribution  and  marketing  abroad  are  radically 
different  from  those  prevailing  in  the  United  States.  For 
instance,  in  many  foreign  countries  wholesale  merchants  or 
jobbers  do  not  exist  and  the  goods  are  mostly  distributed 
through  importers,  commission  houses,  and  local  agents.  Al- 
though a  commission  house  oftentimes  buys  goods  on  its  own 
account  it  will  not  stock  them,  so  that  whether  it  buys  on  its 
own  account  or  for  another,  it  buys  only  what  it  has  already 
sold. 

Channels  for  Foreign  Trade  Advertising 

After  the  prospective  advertiser  becomes  thoroughly  famil- 
iarized with  the  machinery  of  trade  in  a  given  country,  he  is 
ready  to  study  the  channels  available  for  his  advertising — the 
structure  and  requirements  of  the  market,  the  visible  demand 
for  the  article  in  question,  and  also  the  means  of  its  dis- 
tribution. 

Naturally,  if  a  man  decides  to  provide  his  own  channels  of 
distribution  his  plan  of  advertising  will  be  different  from  that 
of  the  exporter  who  aims  to  reach  the  consumer  through  the 
local  importer. 


ADVERTISING    IN    FOREIGN    TRADE 


249 


The  methods  of  advertising  available  to  an  American  trader 
in  foreign  markets  are  as  follows: 

1.  Home  export-trade  papers 

2.  House  organs:  export  and  import 

3.  Export  editions  of  home  publications 

4.  Foreign  directories  and  year-books 

5.  Local  magazines  and  papers  abroad 

6.  Foreign  export  papers 

7.  Catalogues  and  circular  letters 

8.  Exhibits 

9.  Posters 

Value  of  Advertising  Mediums 

Export-trade  papers  published  in  the  United  States  are  of 
some  little  value  as  direct  advertising  mediums  both  for 
producing  inquiries  as  to  the  goods  advertised  and  of  securing 
trial  orders.  They  also  serve  as  a  constant  reminder  to  the 
trade  that  the  concern  Is  in  the  field  and  is  looking  for  orders. 
They  may  keep  the  name  and  the  trade-mark  of  the  adver- 
tising concern  in  the  buyer's  mind  so  that  when  he  places 
orders  he  will  necessarily  consider  the  particular  product  ad- 
vertised in  connection  with  other  products  known  to  him.  The 
advertiser  may  also  choose  this  way  for  discovering  whether 
or  not  there  is  a  demand  for  his  product  In  the  markets  In 
which  the  paper  circulates. 

Unquestionably  such  publications  are  valuable  in  placing 
one's  proposition  before  the  professional  traders  In  foreign 
markets,  but  as  channels  for  reaching  either  the  consumer  or 
the  retailer  In  foreign  countries  their  usefulness  has  not  been 
so  fully  demonstrated.  A  careful  trial  In  any  particular  case 
would  be  a  legitimate  expenditure. 

House  organs  are  issued  by  some  large  Importing  and 
exporting  houses  principally  for  the  purpose  of  maintaining 
and  extending  their  prestige  and  clientele.     Their  value  as 


250  OPERATING   THE   ORGANIZATION 

advertising  mediums  depends  on  the  sort  of  entrance  the 
advertiser  is  desirous  of  making  into  foreign  markets.  If,  as 
in  the  case  of  export-trade  papers,  his  desire  is  to  secure  trial 
orders  or  test  the  avidity  of  any  market,  or  to  estabHsh  his 
trade-mark  more  firmly — then  he  should  consider  fully  the 
possibilities  of  each  one  of  these  house  organs. 

The  same  can  be  said  concerning  the  advisability  of  adver- 
tising in  export  editions  of  local  magazines  and  similar  pub- 
lications of  foreign  countries  and  in  the  various  trade  direc- 
tories circulated  abroad. 

A  list  of  all  the  available  mediums  for  export  advertising 
can  be  secured  from  the  United  States  Department  of  Com- 
merce. With  this  list  at  hand  the  prospective  advertiser  can 
secure  from  those  publications  which  seem  most  suitable,  a 
statement  as  to  what  they  can  do  to  promote  abroad  the  in- 
terests of  his  product. 

Advertising  Specialists 

While  the  selection  of  advertising  mediums  is  a  task  for 
the  expert,  unfortunately  there  are  few  advertising  agencies 
in  this  country  that  specialize  in  foreign  business.  No  such 
agency,  unless  equipped  with  a  staff  of  specialists  which  has 
studied  intensively  the  conditions  in  the  various  fields,  is  in  a 
position  to  offer  sendees  of  the  character  it  supplies  in  the 
domestic  markets. 

Every  advertising  agent,  manager,  or  expert  specializing 
in  foreign  publicity  should,  of  course,  have  a  list  of  adver- 
tising mediums  in  the  territory  he  covers.  He  should  know 
their  circulation,  their  rates,  the  class  of  readers  each  reaches, 
and  the  other  facts  necessary  for  gauging  the  utility  of  the 
publication  to  the  purpose  in  hand.  This  statistical  knowl- 
edge is  easily  obtainable  and  is,  of  course,  kept  on  file  for 
reference  in  the  interests  of  their  clients  by  the  few  agencies 
that  do  specialize  in  the  foreign  field. 


ADVERTISING   IN   FOREIGN   TRADE  2511 

The  advertising  expert,  in  the  true  sense  of  the  word, 
whether  he  confines  his  efforts  to  this  country  or  deals  abroad, 
must  know  at  least  as  much  of  general  conditions  as  the 
sales  manager.  He  must  know  each  market,  its  structure, 
and  its  requirements;  he  must  know  the  people  and  the  busi- 
ness conditions  which  obtain  among  them.  He  must  know 
whom  to  reach  and  how  to  establish  a  community  of  interest 
in  those  whom  he  solicits  as  his  buyers.  Such  knowledge 
must  be  correlated  with  the  knowledge  of  the  product  he  is 
to  advertise,  and  both  must  become  -a  part  of  his  mental 
horizon.  ' 

The  advertising  man's  job  is  no  school  boy's  task,  but  a 
serious,  concentrated  effort  based  upon  solid  information  and 
constructive,  practical  knowledge  of  men  and  things.  The 
task  of  selecting  the  channels  for  advertising  abroad  usually 
falls  upon  the  exporter  and  his  staff. 

Circularizing 

Next  to  the  local  press,  the  quickest  and  best  way  of  get- 
ting in  touch  with  the  prospective  buyers  is  by  means  of  cir- 
cular letters. 

In  America  advertising  or  selling  by  means  of  circular 
letters  is  rather  a  costly  undertaking  and  is  not  alwa)'S  satis- 
factory. It  is  quite  different  abroad  where  merchants  are 
particularly  attentive  to  letters,  especially  those  coming  from 
a  foreign  country.  If  it  is  the  commission  man,  the  jobber, 
or  the  retail  merchant  whom  the  seller  desires  to  reach,  this 
form  of  advertising  commends  itself  strongly  on  account  of 
its  numerous  advantages. 

Successful  circularizing  is  no  bar  to  any  other  method  or 
methods  of  selling  or  of  advertising.  To  be  most  effective, 
however,  the  seller  should  always  be  in  a  position  to  supply, 
on  short  notice,  catalogues  and  prices  of  the  articles  announced 
in  the  circular  letters.     This  can  be  accomplished  by  having 


252 


OPERATING   THE   ORGANIZATION 


a  branch  office,  or  at  least  an  agency  in  the  principal  city  of 
the  country  to  which  the  letters  are  being  sent.  Such  an 
agency  should  be  adequately  supplied  not  only  with  all  the  lit- 
erature on  the  subject  but  also  with  a  full  line  of  samples. 
It  should  furthermore  be  in  the  position  to  handle  orders,  give 
the  necessary  credits,  and  attend  to  everything  that  the  seller 
himself  would  attend  to  if  he  were  on  the  ground  in  person. 
Unless  such  an  arrangement  is  made  beforehand,  circular  let- 
ters can  be  of  service  only  as  a  preliminary  means  toward  be- 
coming acquainted  with  foreign  buyers  before  a  representative 
is  sent  to  call  on  them,  or  before  a  local  branch  or  an  agency 
is  established. 

Local  Advertising  Agencies 

The  subject  of  foreign  advertising  will  remain  compli- 
cated and  difficult  until  a  class  of  competent  foreign  adver- 
tising experts  shall  have  been  developed.  While  inadequate 
facilities  for  handling  such  matters  continue  in  our  country 
it  may  be  found  advisable  to  have  the  foreign  advertising  plans 
carefully  considered  by  a  responsible  advertising  agency  in 
the  country  where  a  selling  campaign  is  contemplated. 

The  advertising  agency  affords  the  producer  expert  ser- 
vice of  his  own  peculiar  kind.  It  is  nearly  always  advisable 
to  secure  an  analysis  of  the  selling  proposition  from  someone 
outside  of  the  organization  who  can  bring  to  its  selling  prob- 
lems a  disinterested  mind,  free  from  fixed  opinions  and  bias. 
The  employment  of  a  competent  advertising  agency  in  the 
foreign  field,  where  such  a  one  is  available,  not  only  saves  ex- 
pense but  enhances  profits  by  increasing  the  efficiency  of  the 
effort. 

Exhibits 

One  feature  of  advertising  abroad  which  has  received  too 
little  attention  from  American  manufacturers  is  the  exhibi- 


ADVERTISING    IN    FOREIGN    TRADE  253 

tion  of  the  product  itself.  Perhaps  it  is  because  hitherto  there 
has  been  very  httle  co-operation  between  the  American  manu- 
facturers in  foreign  trade  that  this  excellent  method  of  intro- 
ducing goods  into  foreign  markets  has  been  woefully  neg- 
lected. Those  who  have  made  a  success  in  foreign  fields 
consider  circular  letters,  distribution  of  catalogues,  and  exhi- 
bition of  products  the  best  possible  preliminary  means  of  in- 
troducing a  product  into  a  new  market.  But,  as  in  the  case 
of  circulars,  local  advertising  by  means  of  exhibits  requires 
at  least  a  temporary  local  representation. 

Posters 

Many  large  American  concerns  which  advertise  on  a 
national  scale  owe  a  considerable  part  of  their  success  to  the 
powerful  appeal  of  the  poster.  A  household  product  may  as 
a  rule  be  successfully  advertised  in  foreign  countries  if  it  is 
suited  to  local  needs  and  does  not  run  counter  to  national 
custom  and  habit.  It  should  be  noted,  however,  that  in  many 
European  countries  outdoor  advertising  is  heavily  taxed  and 
the  facilities  for  such  publicity  compare  unfavorably  with  those 
in  the  United  States.  Before  the  war  outdoor  publicity  on 
an  extensive  scale  was  practically  prohibited  by  the  confine- 
ment of  all  posters  to  a  limited  number  of  "poster  pillars" 
owned  by  the  municipality. 

Information  as  an  Advertising  Basis 

The  most  important  rule  of  all  to  follow  is  that  adver- 
tising cannot  be  planned  scientifically  and  results  cannot  be 
anticipated  with  certainty  unless  correct  information  upon  all 
the  phases  of  the  market  is  obtained  in  the  first  place. 

The  advertiser  must  learn  the  methods  of  buying  in  any 
given  market  before  he  can  successfully  apply  selling  meth- 
ods. Unless  he  is  familiar  with  the  existing  processes  of  buy- 
ing he  cannot  adjust  himself  to  what  to  him  is  an  unknown 


254  OPERATING   THE   ORGANIZATION 

quantity.  The  foreign  merchant's  habits  of  buying  must  be 
studied  for  every  commodity  which  it  is  proposed  to  advertise. 
Foreign  advertising  in  the  last  analysis  is  the  application 
of  specialized  knowledge  of  local  merchandising  to  the  thing  in 
hand. 

Preparation  for  Foreign  Advertising 

Before  embarking  on  an  advertising  campaign  the  sales 
manager  must  give  his  attention  to  the  following  essential 
matters: 

1.  He  must  master  the  machinery  of  distribution  in  the 

new  field  and  know  the  market,  thoroughly  under- 
standing its  structure  and  psychology. 

2.  He  should  then  decide  on  the  extent  of  his  interest  in 

that  market,  determine  the  amount  of  money  to  be 
spent,  and  be  sure  that  the  full  amount  is  available 
before  going  further. 

3.  Next  he  should  select  a  competent  advertising  manager 

who  should  be  told  the  plans  without  reservation  and 
be  placed  in  close  touch  with  the  sales  manager. 

4.  Finally  comes  the  selection  of  the  advertising  medi- 

ums, the  determination  of  methods,  and  the  strong, 
aggressive,  continuous  prosecution  of  the  campaign. 

With  increasing  opportunities  for  the  American  exporter 
this  is  the  propitious  time  for  the  manufacturer  not  only  to 
widen  his  sales  activities,  but  to  intensify  his  efforts  in  the 
territory  where  he  is  already  selling  his  goods. 

It  will,  of  course,  be  recognized  that  the  benefit  from  ad- 
vertising or  any  other  effort  that  increases  the  sale  of  goods 
is  twofold:  (i)  a  profit  in  the  goods  at  their  production  cost 
before  advertising  begins;  (2)  a  further  profit  on  the  de- 
creased cost  which  follows  as  a  consequence  of  increased  pro- 
duction and  sales — due  to  advertising. 


ADVERTISING    IN    FOREIGN    TRADE  255 

As  to  the  general  value  of  advertising,  if  an  article  sells 
well  without  advertising  it  is  a  good  article  to  advertise  for 
it  will  then  sell  better.  The  manufacturer,  therefore,  who  has 
heretofore  managed  to  sell  his  product  abroad  without  any 
publicity  effort  is  perhaps  the  man  to  whom  advertising  would 
yield  the  largest  returns. 


PART    IV 
THE  TECHNIQUE  OF  FOREIGN  TRADE 


CHAPTER   XXXI 

THE  TECHNICALITIES  OF  IMPORTING 

Interrelation  of  Foreign  Trade  Machinery 

The  machinery  of  exporting  rims  into  the  machinery  of 
importing  to  such  an  extent  that  the  two  subjects  may  be 
considered — as  in  fact  they  are — the  opposite  ends  of  the  same 
operation. 

The  manufacturers  who  are  engaged  in  exporting  on  a 
large  scale  frequently  import  raw  material  for  use  in  making 
their  finished  product.  If  they  maintain  branches  or  selHng 
organizations  in  a  foreign  country,  they  are  both  importers 
and  exporters  abroad  as  well  as  at  home. 

If  there  happens  to  be  a  manufacturer  who  is  an  exporter 
exclusively,  the  subject  of  importing  should  nevertheless  con- 
cern him,  because  he  cannot  have  a  complete  understanding 
of  the  machinery  and  requirements  of  exporting  unless  he  also 
knows  the  principles  of  importing. 

It  should  never  be  forgotten  that  an  export  implies  an 
import — that  whenever  goods  are  shipped  into  a  foreign 
country  there  is  always  someone  to  receive  them,  and  that 
someone  is  usually  the  buyer.  If  the  seller  does  not  know 
the  buyer's  problems,  if  he  does  not  understand  the  situation 
and  appreciate  the  buyer's  difficulties,  he  may  make  more 
difficult  both  his  own  sales  and  deliveries  and  those  of  his 
customers. 

For  the  better  understanding  of  the  details  connected  with 
importing  and  exporting  each  subject  should  be  treated  sep- 
arately but  never  one  without  due  consideration  also  of  the 
other. 

259 


26o  THE  TECHNIQUE  OF  FOREIGN  TRADE 

Classes  of  Importers 

There  are,  as  was  noted  in  Chapter  XIII,  many  classes  of 
importers.  In  the  United  States,  perhaps  on  account  of  high 
tariff  imposts,  while  the  importations  are  comparatively  small 
and  the  machinery  is  relatively  simple,  the  procedure  is  more 
or  less  elaborate. 

Our  large  wholesale  houses,  department  stores,  and  import 
merchants  each  have  their  foreign  buyers  who  go  abroad 
periodically  to  replenish  their  stocks.  Some  large  foreign 
houses  maintain  branches  or  agencies  in  the  United  States, 
which  in  turn  employ  selling  staffs  and  compete  actively  with 
domestic  concerns.  These  two  classes  represent  the  most 
important  importing  organizations. 

Custom  House  Procedure 

The  most  difficult  feature  to  understand  and  the  most  im- 
portant legal  part  of  the  importing  business  in  the  United 
States  is  the  custom  house  procedure.  The  tariff  laws  and 
different  schedules  for  each  class  of  goods  are  perplexixig, 
and  the  legal  questions  which  may  arise  are  very  intricate  and 
somewhat  difficult  to  master.  Added  to  this  there  are  com- 
plicated processes  and  countless  rules.  For  these  reasons  the 
importers  themselves  rarely  attend  to  the  formalities  of  entry 
at  the  custom  house.  This  is  usually  attended  to  by  the 
brokers  and  lawyers  who  specialize  in  such  matters.  Another 
reason  for  employing  an  expert  is  that  the  procedure  is  con- 
stantly changing  to  accord  with  the  ever-changing  regulations 
which  govern  foreign  consignments. 

For  the  benefit  of  those  who  should  know  something  of 
these  custom  house  formalities,  however,  a  brief  outline  will 
indicate  how  difficult  it  is  to  get  goods  into  the  United  States 
from  abroad.  But  first  it  is  important  to  consider  the  form- 
alities necessary  at  the  other  end — the  formalities  to  be  ob- 
served in  the  country  of  export. 


THE    TECHNICALITIES    OF    IMPORTING  261 

Foreign  Preliminaries 

Most  American  importers  transact  business  with  foreign 
manufacturers  and  producers  direct  instead  of  through  com- 
mission houses  or  jobbers  as  is  usual  with  exporters. 

Before  the  goods  are  shipped  to  America  from  any  for- 
eign country  the  shipper  is  obliged  to  procure  a  certificate 
from  the  American  consul  in  charge  of  the  district  from  which 
the  goods  are  shipped.  This  certificate  verifies  the  correctness 
of  the  declaration  required  by  law  and  must  accompany  all 
invoices  of  merchandise  which  are  imported  into  the  United 
States. 

The  United  States  law  requires  that  no  imported  goods 
exceeding  in  value  $100  shall  be  admitted  into  the  United 
States  without  the  production  of  a  duly  certified  invoice  con- 
taining a  description  of  the  merchandise  and  a  statement  of 
its  actual  value  in  the  country  where  such  merchandise  was 
produced  or  from  which  it  is  exported.  Such  invoices  must 
be  signed  by  the  purchaser,  owner,  or  manufacturer  who  must 
indorse  thereon  a  declaration  as  to  the  truth  of  his  state- 
ments. 

American  consuls  abroad  are  supposed  to  have  a  knowl- 
edge of  the  actual  value  of  the  goods  shipped,  and  it  is  their 
duty  to  see  that  the  goods  are  not  undervalued  by  the  shipper 
who  is  sending  them  into  the  United  States. 

When  merchandise  is  exported  from  the  United  States 
into  a  foreign  country  and  is  returned  without  having  ad- 
vanced in  its  value,  it  is  allowed  free  entrance  to  the  United 
States,  provided  it  is  accompanied  by  a  declaration  made 
before  an  American  consul  stating  the  facts  in  each  case. 

Each  vessel  clearing  for  the  United  States  from  a  foreign 
port  at  which  an  American  consul  is  stationed  is  required, 
under  a  penalty,  to  obtain  a  bill  of  health  from  the  consul  or 
officer  after  the  consul  has  satisfied  himself  as  to  its  sanitary 
condition.     Every  master  of  an  American  vessel  is  required 


262  THE  TECHNIQUE  OF  FOREIGN  TRADE 

on  arrival  at  a  foreign  port  to  deposit  with  the  American  con- 
sul or  officers  at  the  port  of  arrival,  ship's  papers,  that  is,  the 
register,  crew  list,  and  shipping  articles.  Consular  fees  are 
regulated  by  the  tariffs  prescribed  by  order  of  the  President  of 
the  United  States. 

Domestic  Procedure 

The  usual  procedure  on  the  arrival  of  imported  goods  in 
the  United  States  is  as  follows:  On  receipt  of  the  shipper's 
bill  of  lading,  the  shipper's  invoice,  and  the  invoice  signed  by 
an  American  consul,  the  importer  makes  a  declaration  on  oath. 
The  declaration  is  a  very  important  part  of  the  procedure  as 
the  statements  made  thereon  may  involve  severe  penalties  if 
they  are  false.  The  oath  is  of  two  kinds — one  which  is  used 
when  the  goods  have  been  bought  by  the  importer  himself,  and 
the  other  in  case  they  are  merely  consigned  to  him.  In  either 
case  he  must  fill  out  an  entry  blank. 

Forms  of  Entry  Blanks 

There  are  seven  kinds  of  entry  blanks,  viz.,  entries  for: 

1.  Consumption  or  use  in  this  country 

2.  Warehouse 

3.  Warehouse  and  transportation 

4.  Warehouse  and  exportation 

5.  Immediate  transportation  without  appraisement 

6.  Transportation  and  exportation 

7.  Re-warehouse 

Each  kind  of  entry  has  a  separate  form  which  the  holder 
of  a  properly  indorsed  bill  of  lading  is  entitled  to  fill  in  and 
present  with  his  bill  of  lading  and  invoice  duly  certified  before 
the  collector  of  customs. 

I.  Entry  for  consumption  must  be  made  when  the  importer 
wishes  to  pay  the  duty,  if  there  is  any  duty  to  be  paid,  and  to 
secure  the  release  of  his  consignment  from  government  cus- 


THE    TECHNICALITIES    OF    IMPORTING  263 

tody.  The  entry  must  be  sworn  to  before  the  collector,  his 
deputy,  or  notary  public.  The  appraisement  is  made  according 
to  the  market  value  of  goods,  on  the  day  of  shipment,  in  the 
markets  of  the  country  from  whence  it  is  imported. 

2.  Entry  for  warehouse  is  very  much  the  same  as  the  entry 
for  consumption  and  is  made  in  the  usual  duplicate  form. 
The  importer  may  designate  upon  the  entry  the  bonded  ware- 
house in  which  he  desires  his  merchandise  to  be  deposited  and 
from  which  it  may  be  withdrawn  for  consumption  within 
three  years  from  the  date  of  importation  on  payment  of  duties 
and  charges. 

3.  Entry  for  warehouse  and  transportation  is  made  in  trip- 
licate and  is  similar  to  the  entry  for  consumption. 

4.  Entry  for  warehouse  and  exportation  is  made  when 
goods  are  ultimately  destined  for  a  foreign  country  without 
passing  through  any  part  of  the  United  States. 

5.  Entry  for  immediate  transportation  without  appraise- 
ment is  made  when  the  merchandise  is  consigned  to  a  duly 
designated  port  of  delivery  other  than  the  port  of  entry. 

6.  Entry  for  transportation  and  exportation  is  made  when 
the  goods  merely  pass  through  the  United  States  into  another 
country. 

7.  Entry  for  re-warehousing  must  correspond  with  the 
original  warehousing  and  withdrawals  and  must  be  in  tripli- 
cate. 

The  entry  blanks  go  to  the  appraiser  who,  when  appraise- 
ment is  necessary,  makes  an  appraisal  of  the  goods  according 
to  law. 

Storing  and  Bonding 

If  a  warehouse  entry  has  been  properly  made  the  goods  are 
then  stored  and  bonded  and  may  remain  under  bond  and  pay- 
ment of  duties  be  deferred  for  three  years.  But  if  some  of 
the  goods  imported  are  desired  for  immediate  use  the  importer 


264  THE  TECHNIQUE  OF  FOREIGN  TRADE 

must  pay  the  duty  on  that  part  of  the  shipment  which  is  not 
placed  in  the  warehouse  or,  later,  is  taken  out. 

The  imported  articles  may  be  released  to  the  importer  in 
the  United  States  upon  presentation  by  him  to  the  entry  clerk 
or  deputy  collector  at  the  port  of  entry,  of  his  bill  of  lading, 
invoice,  declaration  of  the  entry,  with  his  certified  check  or 
money  order  for  the  amount  of  duty  estimated  by  him;  and 
if  the  clerk  or  the  deputy  collector  does  not  consider  the  esti- 
mated duty  too  low  he  will  give  permission  for  the  release  of 
the  goods.  At  least  10  per  cent  of  each  consignment  to  an  im- 
porter must  be  sent  to  the  appraiser's  stores  for  examination 
and  valuation  before  it  can  be  delivered  to  the  importer  or  his 
agents,  or  be  sent  to  a  warehouse  subject  to  his  order. 

After  having  paid  the  duty  on  the  value  of  the  goods  as 
previously  entered  in  his  invoice  the  importer  executes  a 
bond  for  a  sum  twice  the  value  of  the  goods  received,  and  after 
undergoing  other  smaller  formalities,  he  may  receive  a  permit 
for  delivery  of  all  cases  of  goods  consigned  to  him  which  have 
not  been  sent  to  the  appraiser's  stores  or  office.  By  presenting 
this  receipt  at  the  steamer's  pier,  the  consignee  or  his  truckmen 
may  obtain  the  goods. 

The  possession  of  the  goods  delivered  at  the  appraiser's 
stores  is  given  to  the  importer  if  the  officials  find  that  the  value 
and  the  rate  of  duty  at  which  the  importer  entered  his  invoice 
are  correct.  The  possession  is  accomplished  by  means  of  a 
delivery  permit  issued  by  the  custom  house. 

Undervaluation 

In  case  the  examiners  should  decide  that  the  goods  in  ques- 
tion have  been  undervalued  by  the  importer,  a  note  of  the 
difference  is  made  to  that  effect  on  the  invoice,  which  must  be 
countersigned  by  the  appraiser  and  his  assistant.  It  is  then 
sent  to  the  liquidating  division  of  the  custom  house  where  the 
amount  of  additional  duty  is  determined  and  assessed,  and 


THE    TECHNICALITIES    OF    IMPORTING  265 

also  the  penalty  provided  by  law  for  a  mistake  in  an  importer's 
entry  which  is  i  per  cent  additional  duty  for  each  i  per  cent 
increase  in  valuation  over  the  invoice  value. 

In  cases  where  the  advance  in  value  made  by  the  appraiser 
exceeds  75  per  cent  of  the  invoice  price,  the  law  presumes  at- 
tempted fraud  and  the  goods  are  subject  to  confiscation,  while 
the  importer  may  be  prosecuted  criminally  for  his  false  state- 
ments made  under  oath. 

There  is  a  right  of  appeal  from  the  appraiser's  decision  in 
regard  to  the  appraised  value  of  the  merchandise.  Such  appeal 
must  be  made  within  ten  days  to  the  collector  of  the  port  who 
presents  it  to  the  board  of  appraisers,  one  of  whom  hears  the 
case.  After  his  decision  either  party — that  is,  either  the  gov- 
ernment or  the  importer — has  a  right  to  appeal  to  the  full 
board.  Three  appraisers  are  assigned  this  time  by  the  board, 
to  hear  the  case.  The  decision  of  these  three  men  as  to  the 
value  of  the  merchandise  is  final.  If  the  rate  of  duty  is  dis- 
puted, the  case  may  be  taken  before  the  United  States  Court 
of  Customs  Appeals  in  Washington ;  the  decision  of  that  court 
is  final. 

When  settlement  of  any  disputes  between  the  importer  and 
the  government  are  finally  made  the  importer,  should  the 
amount  of  duty  he  has  paid  be  found  excessive,  receives  the 
difference  between  the  duty  which  he  has  paid  and  the  amount 
which  has  been  determined. 

There  are  innumerable  blank  forms,  one  for  each  species  of 
goods,  to  be  filled  out  according  to  the  nature  of  the  merchan- 
dise. The  designs  of  some  of  these  forms  are  a  hundred  years 
old.  They  are  sold  at  stationery  stores,  or  may  be  obtained 
free  at  the  custom  house. 

Mistaken  prices  involve  trouble  and  with  it  penalties  for 
the  importer.  He  should  exercise  the  greatest  care  in  making 
his  entry  of  invoice  prices,  as  upon  him  rests  the  responsibility 
of  correcting  any  error  which  the  exporter  may  have  made  in 


266  THE  TECHNIQUE  OF  FOREIGN  TRADE 

declaring  the  value  of  the  shipment.  The  customs  house  allows 
on  an  entry  invoice  only  a  certain  percentage  of  variation  from 
market  prices,  so  that  it  may  be  necessary  for  the  importer, 
in  order  to  meet  the  customs  house  requirements  and  avoid 
prosecution,  to  increase  the  valuation  which  the  exporter  has 
made. 

In  most  of  the  countries  of  the  world,  the  value  used  as  a 
basis  for  calculating  rates  of  duty  is  the  value  of  the  goods  at 
the  port  of  exportation.  The  methods  for  determining  such 
values  vary  greatly. 

On  the  whole  it  is  advisable,  if  the  imports  are  made  in 
any  considerable  cjuantity,  to  retain  a  custom  house  broker  to 
attend  to  the  procedure  at  the  custom  house  on  the  arrival 
of  goods.  Nevertheless  the  importer  and  the  exporter  should 
both  be  familiar  with  the  essentials  of  the  procedure  stated 
above. 


CHAPTER    XXXII 

MANUFACTURING  FOR  EXPORT 

Meeting  the  Customer's  Demands 

At  the  outset  it  may  be  set  down  as  a  fundamental  prin- 
ciple for  the  manufacturer  who  is  seeking  the  surest  methods 
of  success  in  the  foreign  field  that  he  must  enter  his  market 
with  the  goods  the  people  want  and  not  with  the  goods  they  do 
not  want  but  that  he  thinks  they  ought  to  buy.  This  prin- 
ciple applies  to  the  manufacture  of  goods  for  export  just  as 
much  as  to  their  sale. 

British  and  American  manufacturers  have  always  been  cri- 
ticized both  at  home  and  abroad  for  their  shortsightedness  in 
failing  to  meet  the  demands  of  their  foreign  markets  for  goods 
of  a  particular  style,  quality,  and  price.  Their  "take  it  or  leave 
it  policy"  has  cost  some  of  them  large  fortunes  and  resulted 
in  their  failure  to  educate  the  market  to  the  merits  of  an  article 
it  did  not  want,  while  the  more  adaptable  manufacturers  of 
other  nations  have  profited  by  their  experience  and  ultimately 
reaped  the  golden  harvest.  Much  of  this  criticism  has  been 
justified,  but  most  of  it,  as  far  as  the  American  manufacturer 
is  concerned,  has  failed  to  take  into  account  American  manu- 
facturing conditions. 

The  American  Manufacturing  System 

Much  American  manufacturing  has  aimed  at  the  produc- 
tion of  very  large  quantities  of  standardized  materials.  Ford 
cars  are  cheap  because  of  the  large  daily  output  and  because 
Mr.  Ford  has  constantly  refused  to  make  variations  in  his 
standards  to  suit  the  tastes  of  individuals  or  even  of  particular 

267 


268  THE  TECHNIQUE  OF  FOREIGN  TRADE 

markets.  The  changes  in  machinery  and  manufacturing  proc- 
esses necessary  to  adapt  an  article  to  the  needs  or  wishes  of  a 
foreign  market  necessitate  a  change  in  the  price.  In  view  of 
the  usual  uncertainty  of  the  extent  of  the  demand  in  the  for- 
eign market,  the  manufacturer  may  wisely  conclude  that  he 
prefers  to  take  his  chances  with  the  style  that  has  been  success- 
ful at  home.  The  foreign  competitor,  on  the  other  hand,  with 
low  labor  cost  and  more  variable  standards  is  usually  in  a  better 
position  to  cater  to  his  market. 

The  American  manufacturer  too  is  disinclined  to  camou- 
flage a  cheap  article  as  a  more  expensive  one.  Complaints  are 
made  of  the  rough  and  imperfect  finish  of  our  low-priced 
articles.  We  are  told  that  low-priced  American  castings,  to 
note  a  single  example,  proclaim  their  cheapness  in  their  rough 
and  generally  crude  appearance.  The  American's  answer  is  to 
point  to  the  low  price.  An  expensive  American  casting  will 
compare  favorably  in  every  way  with  its  foreign  competitor. 
The  rougher  finish  may  enable  the  manufacturer  to  sell 
the  article  for  a  trifle  less  money,  but  it  is  poor  business,  espe- 
cially in  view  of  the  fact  that  the  Germans  have  been  most  pro- 
ficient in  putting  a  high-grade  finish  on  a  cheap  article  and 
selling  it  at  a  price  between  the  American  prices  for  similar 
articles  of  the  cheaper  and  more  expensive  grades. 

Manufacturing  Details 

If  the  demand  is  sufficient  It  is  usually  advisable  for  the 
manufacturer  to  adapt  his  product  to  the  demand  of  the  mar- 
ket. For  instance,  a  thread  on  a  certain  kind  of  tubing  may  be 
required  by  certain  foreign  markets  to  be  of  particular  dimen- 
sions. If  the  manufacturer  in  America  does  not  comply  with 
the  specifications  of  the  foreign  customer,  the  whole  consign- 
ment may  prove  useless  to  him.  The  same  may  be  said  of  ship- 
ping machinery  abroad  when  no  provision  has  been  made  that 
in  case  parts  of  it  break  they  can  readily  be  replaced  or  others 


MANUFACTURING    FOR    EXPORT  269 

substituted.  For  the  most  part,  this  non-compliance  with  the 
ordinary  common-sense  requirements  of  a  foreign  order  is 
sheer  negHgence.  It  should  be  borne  in  mind  that  in  a  country 
thousands  of  miles  away  from  the  place  of  manufacture  it  is 
a  difficult  matter  to  replace  parts  of  machinery.  If  the  cus- 
tomer neglects  to  order  duplicate  parts,  the  manufacturer 
should  not  fail  to  bring  the  matter  to  his  attention. 

It  is  exceedingly  expensive  to  attempt  to  educate  the  mar- 
ket to  absorb  products  irrespective  of  prevailing  conditions, 
a  proceeding  of  which  the  American  manufacturer  has,  on 
many  occasions,  been  guilty.  The  rational  mode  of  procedure 
is  to  study  the  requirements  of  a  given  market  and  if  possible 
standardize  the  product  to  suit  these  requirements. 

Find  out  just  what  the  consumer  wants,  learn  how  near  the 
product  comes  to  it,  and  decide  whether  in  view  of  the  extent 
of  the  demand  it  is  practicable  to  meet  that  want. 

Latent  Demand 

There  is  no  difference  in  the  principle  of  adjusting  the 
product  to  the  foreign  market  and  to  the  domestic  market, 
except  that  the  distributor  plays  a  very  much  more  important 
part  as  a  selling  factor  abroad  than  he  does  in  the  United 
States.  It  is  from  him  that  the  manufacturer  can  best  ascertain 
the  potentialities  of  the  latent  demand.  Established  demand 
and  active  demand  he  should  be  able  to  observe  himself,  tabu- 
lating his  observations  so  as  to  standardize  his  product  accord- 
ingly. Mere  surface  indications  should  never  be  accepted  as  a 
final  test. 

Latent  demand  is  a  dangerous  factor  to  deal  with  in  foreign 
trade  because  of  the  distance  of  the  market  from  the  factory. 
New  conditions  may  arise  which  cannot  be  met  satisfactorily. 
The  manufacturer  for  export  will  do  better  to  deal  only  with 
established  and  active  demand  instead  of  experimenting  to 
determine  latent  demand. 


oyo  THE  TECHNIQUE  OF  FOREIGN  TRADE 

However,  the  latent  demand  in  connection  with  the  estab- 
lished demand  must  not  be  lost  sight  of,  for  such  latent  demand 
may  represent  the  real  need  of  the  people  and  the  desire  for 
improvement  in  the  article  which  has  an  established  market. 
It  is  here  that  the  manufacturer  reaps  the  greatest  reward  if 
he  can  anticipate  what  his  competitors  fail  to  see. 

A  certain  manufacturer  of  shoes  discovered  that  a  large 
number  of  laborers  and  farmers  were  wearing  light,  semi- 
dress  shoes  instead  of  the  ordinary  work  shoes  with  which 
the  market  was  abundantly  supplied.  His  study  and  investi- 
gation revealed  that  the  work  shoes  were  very  heavy  and  ex- 
ceedingly uncomfortable,  designed  for  durability  and  for 
nothing  else.  A  great  many  people  who  should  have  worn  them 
were  willing  to  sacrifice  economy  for  comfort  and  bought  less 
suitable  footwear.  The  manufacturer  in  question  changed  his 
product  by  putting  more  style  and  comfort  into  the  work  shoe 
until  it  had  not  only  the  strength  to  stand  heavy  and  rough 
use,  but  good  appearance  and  comfort  as  well.  When  he  placed 
this  improved  shoe  on  the  market  he  was  swamped  with  orders. 
His  ingenuity  brought  him  a  fortune  in  a  short  time  and 
changed  the  standards  of  manufacture  of  that  particular  shoe 
all  over  the  world.  This  is  an  illustration  of  a  latent  demand 
which  was  readily  made  active. 

Production  and  Local  Methods 

Another  important  principle  for  the  export  manufacturer 
to  bear  in  mind  is  that  production  should  be  studied  in  con- 
nection with  the  methods  and  machinery  of  distribution  which 
prevail  in  a  particular  market. 

\i  the  machinery  of  the  market  consists  largely  of  retail 
dealers,  the  manufacturer  who  takes  pains  to  teach  the  dealer 
how  to  stimulate  the  desire  of  the  consumer  or  how  to  realize 
turnovers  and  who  works  with  the  dealer  in  close  co-operation 
stands  a  better  chance  of  selling  his  product  than  one  whose 


MANUFACTURING    FOR    EXPORT  271 

prices  are  lower  but  who  is  less  progressive  in  his  selling 

methods. 

The  usual  mistake  made  by  manufacturers  interested  in 
export  is  to  neglect  to  take  into  consideration  the  mutability  of 
local  conditions.  In  domestic  trade,  a  producer  would  not 
think  of  relaxing  his  vigilance  in  watching  the  activities  of 
his  competitors.  In  foreign  markets  where  changes  are  more 
likely  to  occur,  of  which  on  account  of  the  distance  he  may 
know  nothing,  he  adopts  a  laissez-faire  policy  and  lets  things 
care  for  themselves.  There,  if  anywhere,  he  should  exercise 
the  utmost  vigilance  by  always  having  someone  on  the  ground 
to  watch  the  situation  and  to  keep  him  fully  informed.  The 
local  demand  changes  abroad  as  rapidly  as  it  does  at  home. 
New  fashions,  new  uses,  new  desires — all  call  for  constant 
watchfulness  and  continual  adaptation  to  meet  the  market's 
fancy  and  to  keep  abreast  of  competition. 

Price  and  Quality 

Some  manufacturers  are  too  prone  to  assume,  in  cases 
where  others  can  undersell  them,  that  there  is  no  market  for 
their  goods. 

No  complaint  is  heard  more  frequently  among  manufac- 
turers than  that  it  is  difficult  to  meet  foreign  prices.  'Tf  I 
could  only  undersell  these  people,  or  even  sell  as  cheaply,  I 
would  reap  a  harvest  in  no  time,"  is  the  common  complaint. 
The  price  of  the  product  is  of  course  an  important  element 
in  its  salability,  but  it  is  not  everything.  Quality  also  is  of 
vast  importance  in  foreign  trade.  The  term  "quality"  is 
not  meant  to  imply  merely  the  intrinsic  value  of  the  article 
nor  its  appearance.  The  quality  is  also  found  in  weight,  in 
adaptability  to  transportation  requirements,  in  size  sometimes, 
and  frequently  in  added  improvements. 

For  example,  an  ordinary  bottle  may  cost  less  than  a  non- 
refillable  bottL\  but  the  latter  may  drive  the  former  from  cer- 


272  THE  TECHNIQUE  OF  FOREIGN  TRADE 

tain  markets  in  spite  of  its  price.  And  the  same  may  be  said 
of  automobiles  fitted  up  with  self-starting  devices  or  with  non- 
skidding  tires.  Such  examples  can  be  multiplied  ad  infinitum. 
Sometimes  a  different  color  or  shape,  a  more  attractive  label, 
a  neater  container,  or  a  prettier  band,  lid,  or  fastener  adds  to 
an  article's  selling  quality. 

Conclusion 

In  some  cases  it  may  be  possible  for  the  American  manu- 
facturer, by  the  use  of  the  advertiser's  art,  to  create  a  demand 
in  foreign  countries  for  the  exact  line  of  goods  he  is  already 
manufacturing.  He  does  this  for  the  domestic  market  when- 
ever he  introduces  a  new  line  or  a  new  commodity,  and  it  is 
possible  to  do  the  same  thing  in  foreign  countries.  It  requires 
skill  and  ability  to  do  work  of  this  kind  at  home  and  requires 
greater  skill  and  ability  to  work  abroad  where  trade  condi- 
tions are  dissimilar. 

But,  generally  speaking,  it  would  appear  to  be  more  advis- 
able to  meet  the  demands  of  the  foreign  market.  The  manu- 
facturer should,  however,  not  attempt  a  radical  departure  from 
his  standardized  product  involving  changes  in  machinery  and 
manufacturing  methods  with  corresponding  increases  of  price 
until  he  has  some  assurance  that  the  proposed  market  can  ab- 
sorb his  products  in  sufficient  quantities  to  make  the  venture 
a  profitable  one. 


CHAPTER   XXXIII 

FROM  FACTORY  TO  SEAPORT 

The  Technicalities  of  Exporting 

The  knowledge  pertaining  to  the  shipment  of  goods  into 
foreign  markets  should  be  highly  specialized.  It  is  of  vast 
importance,  both  to  the  buyer  and  the  seller,  that  no  mistakes 
occur  in  the  processes  involved  in  delivering  the  merchandise 
from  the  factory  to  the  warehouse  of  the  importer  or  his 
place  of  business. 

The  processes  which  must  be  undertaken  to  effect  the  de- 
livery of  export  shipments  usually  involve  seven  distinct  opera- 
tions which  are  as  follows: 

1.  Packing 

2.  Marking 

3.  Railroad  transportation  to  the  port  of  export 

4.  Transfer  at  the  port  of  shipment 

5.  Shipping  arrangements  at  the  port 

6.  Insurance 

7.  Bank  arrangements 

These  different  steps  are  taken  up  in  order  in  this  and  the 
following  chapters. 

Packing 

This  subject  has  been  always  at  the  front  whenever  Amer- 
ican exports  are  discussed,  presumably  on  the  ground  that  our 
manufacturers  are  negligent  in  observing  the  requirements  of 
proper  methods  in  packing  goods  for  export  trade.  Writers 
and  lecturers,  and  even  government  officials,  constantly  accuse 
our  novices  in  foreign  trade  of  not  having  learned  even  the 

273 


274  THE  TECHNIQUE  OF  FOREIGN  TRADE 

most  elementary  lessons  of  properly  preparing  merchandise  for 
foreign  shipments. 

Packing  for  export  is  as  much  a  technical  matter  as  manu- 
facturing. The  knowledge  required  is  not  only  highly  tech- 
nical, but  it  must  be  practical  as  well.  In  other  words,  one 
cannot  learn  everything  about  packing  by  reading  books  on 
the  subject  nor  by  studying  different  requirements  for  dif- 
ferent countries.  Such  knowledge  is  useful  and  necessary,  but 
finished  competency  comes  only  through  observation  and  prac- 
tical experience. 

The  fundamental  principle  is  simple.  Goods  should  be 
packed  with  a  view  to  both  the  general  and  special  conditions 
of  ocean  transportation,  as  described  below. 

General  Conditions  to  be  Considered  in  Packing 

General  conditions  of  transportation  to  foreign  countries 
are  those  which  are  common  to  all  shipments  by  water,  that  is, 
rough  handling,  climatic  conditions  during  the  voyage,  and 
the  exposure  of  packages  to  rain  and  storms.  To  appreciate 
some  of  these  conditions  of  ocean  transportation  one  should 
go  to  the  dock  and  see  how  the  freight  is  handled  when  it  is 
loaded  and  unloaded,  observing  the  process  not  only  in  the  case 
of  one  vessel  but  a  dozen  different  vessels.  It  does  little  good 
to  describe  the  rough  handling  the  goods  undergo,  the  piling 
of  packages  one  upon  the  other,  as  these  conditions  require 
I>ersonal  observation  to  be  thoroughly  realized.  To  meet  them 
packing  must  be  far  more  careful  and  cases  and  boxes  must 
be  stouter  and  better  fastened  than  in  the  ordinary  domestic 
shipment. 

Special  Conditions  to  be  Considered  in  Packing 

Special  conditions  incident  to  ocean  transportation  include 
those  which  arise  at  the  place  of  delivery  of  goods.  In  many 
foreign  ports  the  freight  is  unloaded  from  the  steamers  onto 


FROM  FACTORY  TO  SEAPORT         275 

the  lighters,  which  in  turn  unload  at  the  wharf,  at  times  under 
difficult  conditions.  Some  of  these  wharves  or  docks  are  un- 
protected by  roof  or  covering  of  any  kind  and  on  these  the 
goods  are  exposed  to  all  sorts  of  weather.  Again,  each  country 
has  its  own  regulations  as  to  packing  and  marking  the  pack- 
ages which,  if  not  complied  with  by  the  shipper,  will  cause 
trouble  and  annoyance  to  the  consignee. 

It  must  not  be  forgotten  that  the  goods  frequently  have  to 
be  shipped  into  the  interior  of  the  country.  The  conditions  of 
such  transportation  should  be  studied,  for  merchandise  must 
be  packed  to  suit  these  conditions.  For  instance,  in  some 
countries  the  freight  to  the  interior  is  transported  on  the  backs 
of  mules  which  method  naturally  limits  the  size  of  the  pack- 
ages. Instructions  as  how  to  pack  a  certain  class  of  goods  for 
a  particular  destination  should  invariably  be  obtained  at  the 
consulate  of  the  country  to  which  the  shipment  is  to  be  made 
or  from  the  Department  of  Commerce. 

Instructions  from  the  buyer  as  to  the  manner  of  packing 
a  particular  shipment  should  also  be  sought  and  minutely  fol- 
lowed. In  fact,  the  proper  packing  of  goods  is  a  matter  of 
such  vast  importance  that  no  opportunity  should  be  neglected 
to  examine  all  available  sources  of  information  on  the  subject. 
For  instance,  every  shipper  should  know  that  the  goods  he  is 
sending  to  South  America  are  usually  unloaded  from  the 
steamer  into  a  lighter  and  thence  to  the  dock  or  pier,  so  that 
they  are  handled  a  number  of  times  and  under  the  most  vary- 
ing conditions  before  they  reach  the  custom  house. 

General  Instructions  for  Packing 

Ocean  carriers  usually  charge  according  to  space  so  the 
goods  should  be  packed  also  with  a  view  to  the  space  they  are 
to  occupy.  The  safest  rule  to  follow  is  to  pack  in  the  strongest 
boxes  possible,  designed  to  occupy  the  smallest  possible  space. 

Cases  should  preferably  not  exceed  250  lbs.   in  weight. 


276  THE  TECHNIQUE  OF  FOREIGN  TRADE 

They  should  not  be  too  large  and  they  should  be  packed  full. 
Empty  space  is  not  only  extravagance  but  it  makes  for  weak- 
ness and  is  a  constant  cause  of  damage  from  breakage.  Water- 
proof protection  should  be  used  to  avoid  the  damage  which  is 
inevitable  to  goods  left  exposed  to  the  rain  and  sun  on  the 
unroofed  wharves  of  South  America.  Hermetically  sealed, 
metal-lined  cases  are  being  used  increasingly,  but  the  English 
still  cling  to  the  good  old  custom  of  using  cloth  and  tarpaulin. 

Cases  should  be  fastened  with  iron  straps  not  only  to  in- 
crease strength  but  to  afford  additional  protection  against  theft. 

Each  kind  of  goods  should  be  packed  by  itself  in  order  to 
avoid  complications  in  the  matter  of  import  duties. 

Marking 

The  manner  of  marking  the  packages  is  also  of  great 
importance,  because  different  foreign  countries  have  different 
requirements  as  to  marking.  Some  countries  require  that 
marks  shall  be  made  in  stencil  instead  of  with  a  brush;  other 
countries  require  the  marks  to  be  placed  on  two  or  more  adja- 
cent sides  of  the  packages ;  still  other  countries  have  the  pro- 
vision that  net  and  gross  weights  in  kilograms  be  noted  on 
each  package.  Delays,  fines,  and  annoyances  of  all  kinds  fol- 
low if  the  regulations  are  not  complied  with. 

It  is  customary  to  mark  the  packages  for  export  with  let- 
ters and  numbers  instead  of  with  the  name  of  the  consignee. 
This  is  done  because  it  requires  less  work  to  enter  the  letters 
on  the  bill  of  lading  and  various  other  documents  and  books 
and  also  to  prevent  competitors  from  knowing  to  whom  the 
goods  are  sent. 

This  practice  is  a  great  aid  in  hastening  the  loading  and 
unloading  of  vessels.  If  the  exporter  uses  second-hand  cases 
he  should  carefully  obliterate  all  the  previous  marks.  Such 
phrases  as  "Glass,"  "Fragile,"  etc.,  are  as  confusing  as  they 
are  useless.     Some  countries  require  that  each  package  of  a 


FROM  FACTORY  TO  SEAPORT         277 

shipment  should  receive  a  serial  number.  This  number  to- 
gether with  the  consignee's  symbol,  the  gross  and  net  weight, 
and  the  port  marks  are  usually  all  that  are  essential.  The  port 
mark  indicates  the  ultimate  destination  of  the  package — the 
terminus  of  the  voyage,  but  not  necessarily  the  address  of  the 
consignee. 

The  letters  used  should  be  from  2  to  3  inches  in  height. 
Extreme  care  should  be  taken  with  each  detail.  Weights  and 
measurements  should  in  every  case  be  scrupulously  exact. 
Foreign  trade  is  too  expensively  obtained  and  subject  to  too 
great  a  competition  to  permit  it  to  be  jeopardized  in  its  final 
stage  by  careless  marking.  Infallable  accuracy  is  the  supreme 
qualification  of  the  shipping  clerk. 

The  use  of  the  stencil  is  usually  to  be  preferred  to  any 
other  method.  Tags  and  cards  are  out  of  the  question.  Indel- 
ible ink  applied  with  a  brush  is  the  only  way  to  prevent  obliter- 
ation by  rain,  sea-water,  and  abrasion. 

The  manufacturer  doing  a  fair  export  business  should  en- 
deavor to  engage  a  clerk  who  is  thoroughly  familiar  with 
export  shipping,  which  means  familiarity  with  packing,  mark- 
ing the  packages,  routing  the  freight,  and  other  formalities 
incidental  to  export  trade.  The  manufacturer,  especially  when 
he  makes  only  occasional  foreign  shipments,  should  not  only 
procure  the  marking  regulations  of  different  countries  with 
which  he  is  dealing  and  the  instructions  from  the  United  States 
Department  of  Commerce,  but  he  should  also  visit  the  plants 
which  do  exporting  and  observe  there  the  methods  pursued  to 
comply  with  the  conditions  of  ocean  traffic. 

Railroad  Transportation  of  Exports 

The  average  American  manufacturer  needs  no  instructions 
on  the  subject  of  railroad  transportation.  A  number  of  up-to- 
date  companies  have  traffic  men  who  are  familiar  also  with 
ocean  traffic  and  the  methods  of  handling  freight  for  export. 


278  THE  TECHNIQUE  OF  FOREIGN  TRADE 

The  local  transportation  company  also  may  be  in  a  position 
to  give  advice  on  all  points  pertaining  to  foreign  shipments  to 
the  manufacturer  shipping  freight  to  consignees  abroad. 

There  are  railroads  which  issue  through  bills  of  lading  to 
certain  points  abroad,  and  if  the  manufacturer  happens  to  be 
on  such  a  road  and  is  shipping  to  the  destination  covered  by  the 
railroad,  he  may  merely  deliver  his  goods  at  the  depot.  But 
such  cases  are  rare.  The  manufacturer  may  do  well  to  com- 
municate with  a  reliable  export  freight  forwarder  at  the  port 
through  which  he  will  route  his  foreign  shipment.  Such  con- 
cerns may  have  charge  of  other  freight  in  the  vicinity  and  by 
combining  the  shipments  they  are  frequently  able  to  quote 
cheaper  rates  than  if  the  consignments  were  made  in  individual 
lots. 

The  ordinary  "domestic  billing"  is  not  suitable  for  export 
shipping.  Those  railroads  which  issue  through  bills  of  lading 
do  so  only  for  the  ports  on  the  Pacific  Ocean  and  only  at  the 
points  where  they  have  commercial  agents. 

Steamship  companies  covering  the  routes  to  South  Amer- 
ica do  not  permit  railroads  to  issue  through  bills  of  lading. 
These  are  obtainable  only  when  the  goods  are  on  board  the 
ship. 

Transfer  at  the  Port  of  Shipment 

A  large  number  of  our  export  shipments  are  made  through 
the  port  of  New  York  and  there  the  transportation  of  freight 
from  the  railroad  pier  to  the  wharf  offers  a  great  many  prob- 
lems. A  glance  at  the  map  of  New  York  City  will  at  once 
reveal  some  of  these  problems.  The  city  has  a  great  length 
and  the  distance  from  the  freight  depot  of  the  railroad  to  the 
nearest  steamer  is  usually  several  miles.  In  such  cases  one  fre- 
quently has  to  pay  for  cartage  alone  more  than  it  costs  to  send 
the  freight  to  its  destination  by  steamer. 

It  is  not  unusual  to  pay  for  ferriage  as  well  as  for  truck- 


FROM  FACTORY  TO  SEAPORT  279 

age.  Many  steamships  lines  leave  from  the  New  Jersey  coast, 
and  if  the  goods  are  consigned  by  railroad  to  New  York  the 
ferry  is  the  only  method  of  getting  them  to  Hoboken  and 
other  Jersey  ports. 

Of  course,  in  many  cases  where  free  lighterage  privileges 
exist,  as  when  the  consignments  are  made  in  car-load  lots,  the 
shipper  need  not  bother  himself  on  their  arrival  in  New  York 
in  so  far  as  cartage  is  concerned.  In  other  cases,  the  only 
advice  which  can  be  given  on  the  subject  is  to  study  carefully 
the  map  of  New  York  City  and  to  take  into  consideration  the 
relative  locations  of  the  steamship  companies  and  railroad 
freight  depots  when  deciding  upon  lines  and  routes  for  ship- 
ment. 


CHAPTER   XXXIV 

SHIPPING  ARRANGEMENTS  AT  THE  PORT 

What  the  Shipping  Arrangements  Include 

After  the  shipper  has  completed  his  transportation  arrange- 
ments on  land  he  is  confronted  with  making  the  shipping 
arrangements  at  the  port.  The  steps  that  must  yet  be  accom- 
plished before  his  goods  are  under  way  may  be  classified  under 
three  heads : 

1.  Arrangements  with  steamship  company 

2.  Consular  formalities 

3.  Custom  house  procedure 

Choosing  the  Steamship  Company 

About  two-thirds  of  the  total  exports  of  the  country  pass 
through  the  port  of  New  York.  While  a  large  part  of  our 
trade  with  Mexico  and  Canada  is  carried  by  rail,  wherever 
possible  the  great  bulk  of  our  exports  will  always  follow  the 
cheaper  ocean  traffic  routes. 

The  shipper  should  always  consult  his  customer  as  to  the 
particular  route  by  which  he  desires  to  have  the  consignment 
sent,  and  if  a  preference  is  expressed  should  comply  with  the 
customer's  wishes  in  the  matter.  If  the  latter  has  no  prefer- 
ence the  route  may  be  chosen  which  is  the  most  convenient  to 
the  shipper  and  which  offers  him  the  best  rates. 

Among  the  most  prominent  ocean  carriers  before  the  Great 
War  were:  the  North  German  Lloyd,  Hamburg-American, 
Holland-America,  Cunard,  and  the  companies  which  composed 
the  International  Mercantile  Marine,  viz.:  the  White  Star, 
Leyland,  Red  Star,  Atlantic  Transport,  and  American  lines. 

280 


SHIPPING    ARRANGEMENTS    AT    THE    PORT  281 

The  United  Fruit  Company  is  probably  the  largest  American 
company  engaged  in  sea  traffic,  but  it  confines  its  activities  to 
coastwise  transportation  between  the  seaports  on  the  Atlantic 
coast  from  New  England  to  Central  America. 

Rates 

It  is  understood,  when  a  steamship  company  makes  a 
quotation  on  freight  "per  ton  weight  or  measurement,  ship's 
option"  that  charges  will  be  made  on  a  weight  basis  if  the 
weight  of  the  shipment  carries  a  heavier  shipping  charge  than 
would  the  cubic  measurement,  or  on  a  basis  of  measurement 
should  the  cubic  measurement  freight  rate  exceed  the  weight 
charge. 

Nearly  all  the  foreign  steamship  lines  quote  freight  rates 
on  the  basis  of  2,240  lbs.,  or  40  cu.  ft.  measurement  to  the  ton, 
and  some  domestic  companies  estimate  a  ton  at  2,000  lbs. 
When  charging  so  much  per  100  lbs.,  or  so  much  per  cubic 
foot,  however,  it  is  immaterial  whether  they  consider  the  ton 
as  2,240  or  2,000  lbs. 

Ocean  freight  rates  are  continually  fluctuating  and  it  is  not 
unusual  for  a  steamship  company  to  change  from  the  weight 
basis  to  the  measurement  basis  and  vice  versa. 

Freight  rates  are  usually  prepaid.  It  is  well  for  the  foreign 
trader  to  make  his  customer  understand  that  freight  charges 
if  prepaid  will  appear  on  the  exporter's  invoices  and  drafts. 
Our  foreign  competitors  in  some  cases  deduct  freight  charges 
and  consequently  some  foreign  customers  expect  similar  liber- 
ality from  us.  The  minimum  of  the  bill  of  lading  is  usually 
about  $5,  this  representing  the  normal  freight  charge  for  from 
I  to  2  tons  occupying  from  40  to  80  cubic  feet.  Minimum 
bills  of  lading  can  be  avoided  through  a  combination  of  small 
shipments,  which  can  be  arranged  through  those  freight  for- 
warders who  specialize  in  shipping  small  export  orders. 

Transportation  by  water  is  normally  cheaper  than  by  land. 


282  THE  TECHNIQUE  OF  FOREIGN  TRADE 

In  the  one  case  it  is  necessary  to  consider  only  the  deprecia- 
tion of  the  vessel,  while  in  the  other  the  depreciation  and  up- 
keep must  include  not  only  the  carrier  but  the  road  on  which 
it  is  carried.  The  law  of  supply  and  demand  in  its  effect  upon 
prices,  however,  operates  in  ocean  transportation  as  in  any 
other  department  of  business.  Both  the  amount  of  tonnage 
available  and  the  supply  of  commodities  to  be  shipped  are  sub- 
ject to  wide  variations  with  a  corresponding  effect  on  rates. 
In  normal  times  the  former  element  fluctuates  but  slightly,  but 
at  the  present  moment  it  is  as  changeable  a  factor  as  the  supply 
of  goods.  Competition  among  the  transportation  companies 
and  the  question  of  return  cargo  also  normally  have  an  impor- 
tant bearing  on  the  matter  of  ocean  rates. 

Regulations  Pertaining  to  the  Handling  of  Freight 

Most  companies  require  that  freight  room  be  engaged  in 
advance  on  large  shipments.  Some  permit  shipments  con- 
signed to  order,  other  companies  require  the  name  of  the  con- 
signee on  all  bills  of  lading  and  also  that  it  be  marked  on  pack- 
ages. Some  companies  attend  to  the  clearance  of  shipments, 
but  most  of  them  require  a  shipper's  manifest  with  the  bill  of 
lading. 

Some  carry  hazardous  cargo  by  special  agreement,  but 
most  companies  do  not  handle  such  shipments  at  all.  Most 
companies  require  that  valuables  be  shipped  in  sealed  cases. 

The  steamship  company  usually  prescribes  how  the  freight 
is  to  be  packed,  whether  it  is  to  be  prepaid  or  not,  and  whether 
or  not  it  can  be  consigned  to  order.  Of  course  these  regula- 
tions are  made  so  as  to  conform  to  the  law  and  customs  re- 
quirements of  each  country  as  much  as  for  the  convenience 
and  welfare  of  the  company. 

Manifestly  the  regulations  made  by  the  steamship  company 
are  as  important  to  know  and  to  comply  with  as  those  pre- 
scribed by  the  different  consulates. 


SHIPPING    ARRANGEMENTS    AT    THE    PORT         283 

Certain  obvious  disadvantages  exist  in  connection  with 
those  countries  which  do  not  permit  shipments  "to  order,"  or 
"in  care  of,"  because  oftentimes  credit  arrangements  largely 
depend  upon  the  feasiljility  of  the  goods  being  consigned 
"to  order"  or  "in  care  of." 

In  studying  the  problems  of  exports  one  is  naturally 
anxious  to  know  the  rates  charged  on  shipments,  how  these 
charges  are  made,  how  and  when  the  shipments  are  to  be  paid 
for,  whether  they  are  to  be  paid  by  the  consignee  or  by  the 
consignor,  what  cargo  is  accepted  and  what  is  not,  how  the 
shipments  should  be  arranged,  and  so  on. 

Obviously  such  information  is  not  of  a  stationary  char- 
acter. The  only  safe  rule  to  follow  in  each  case  is  to  secure 
all  the  available  data  from  steamship  companies  and  the  con- 
sulate of  the  country  with  which  the  trade  is  carried  on  or 
contemplated. 

Notwithstanding  this,  oftentimes  it  becomes  necessary  for 
the  exporter  or  the  prospective  exporter  to  know  at  once  the 
consular  and  shipping  requirements  in  one  or  more  countries. 
Such  information  can  be  secured  from  the  different  year- 
books and  export  encyclopedias. 

A  summary  of  some  of  the  more  important  of  these  regula- 
tions is  given  in  Chapter  XLIII,  so  that  those  interested 
may  at  a  glance  learn  some  of  the  principal  formalities  which 
must  be  observed  before  goods  can  be  shipped  into  a  given 
country. 

Shipping  Permit 

Some  companies  require  a  shipping  permit  before  goods 
will  be  received  at  their  dock.  This  document  notifies  the  re- 
ceiving clerk  at  the  dock  to  accept  certain  quantities  of  freight 
on  a  certain  date.  Deliveries  must  be  made  in  accordance  with 
the  permit. 

When  the  goods  are  delivered  a  receipt  is  issued  by  the 


284  THE  TECHNIQUE  OF  FOREIGN  TRADE 

receiving  clerk  at  the  dock,  the  dock  receipt  being  ultimately 
exchanged  for  a  bill  of  lading  at  the  steamship  agent's  office. 

The  Bill  of  Lading — Export  Invoice 

The  bill  of  lading  may  be  defined  as  the  written  evidence 
for  the  conveyance  and  delivery  of  merchandise  sent  by  sea 
to  certain  destinations.  It  is  both  a  receipt  of  goods  and  a 
contract  to  deliver  the  same  as  freight.  It  is  executed  by  the 
captain  or  the  owners  of  the  vessel  by  which  the  goods  are 
shipped.  Each  steamship  company  has  its  own  peculiar  forms 
of  bills  of  lading. 

The  export  invoice  is  a  written  statement  reciting  the  par- 
ticulars as  to  the  nature,  quantity,  quality,  weight,  price,  and 
description  of  the  merchandise  consigned  to  some  person  at  a 
distance.  It  is  no  evidence  of  sale,  being  only  an  account  of 
goods  sent  by  merchants  to  their  customers  or  correspondents 
at  home  or  abroad,  indicating  the  exact  nature  and  value  of  the 
things  shipped. 

Consular  Requirements 

Nearly  every  country  of  the  world  has  some  consular  re- 
quirements which  must  be  complied  with  before  the  merchan- 
dise is  finally  dispatched  to  it.  Most  countries  require  that  all 
foreign  merchandise  entering  their  ports  shall  be  certified  to  by 
their  respective  consuls  stationed  at  the  port  from  which  the 
goods  are  shipped.  The  certification  is  made  upon  the  invoices, 
which  must  be  in  a  prescribed  form.  Blank  forms  are  to  be 
had  at  the  respective  consulates. 

The  consuls  have  rules  regulating  the  number  of  copies  of 
the  invoices  to  be  prepared,  the  language  in  which  they  must 
be  made,  when  presented,  etc.  Many  countries  require  that 
certificates  of  origin  be  annexed  to  these  consular  invoices  and 
that  the  bills  of  lading  be  certified  to  by  the  consul. 

There  are  other  formalities  and  regulations  which  in  every 


SHIPPING    ARRANGEMENTS    AT    THE    PORT         285 

case  should  be  carried  out  minutely,  otherwise  an  infinite 
amount  of  trouble  may  result  and  the  shipper  as  well  as  the 
consignee  will  be  the  sufferer  in  the  end.  In  each  case  of  con- 
sular service  a  small  fee  is  exacted. 

Non-dumping-  certificates  are  also  required  by  certain  Brit- 
ish colonies.  The  non-dumping  certificates  enable  the  import- 
ing country  to  guard  against  the  dumping  of  foreign  goods 
into  their  markets  at  prices  which  are  lower  than  the  cost  of 
production.  They  are  required  chiefly  by  Canada,  Australia, 
New  Zealand,  and  South  Africa. 

In.  addition  to  the  above  there  are  consular  regulations  re- 
garding the  packing  and  the  marking  of  packages  and  cases. 
In  every  instance  an  export  declaration  is  required.  Some 
countries  prohibit  importation  of  certain  articles;  others  make 
stringent  rules  regarding  the  entry  of  particular  classes  of  mer- 
chandise, for  instance,  patent  medicines. 

The  shipment  of  meat  and  animal  products  oftentimes 
necessitates  the  procuring  of  health  or  inspection  certificates 
from  the  United  States  authorities.  It  must  be  remembered 
that  these  regulations  are  changed  by  the  respective  govern- 
ments without  notice. 

When  the  exporter  has  decided  to  enter  the  markets  of  a 
certain  country,  or  when  deliberating  upon  the  advisability  of 
the  entry,  he  should  thoroughly  inform  himself  at  the  con- 
sulate as  to  the  rules  and  regulations  governing  incoming  ship- 
ments. Neither  should  he  fail  to  familiarize  himself  with  the 
different  forms  of  documents  which  he  is  to  fill  out  and  sign. 


CHAPTER    XXXV 

CUSTOM  HOUSE  EXPORT  PROCEDURE 

Shipper's  Export  Declaration 

The  custom  house  procedure  for  the  exportation  of  goods 
to  foreign  countries  is  prescribed  by  the  government  in  the 
regulations  of  the  Treasury  Department.  This  procedure  is 
subject  to  change.  At  the  present  writing  the  ruHngs  in  force 
are  those  placed  in  effect  on  February  i,  1916. 

Before  goods  can  be  received  at  the  custom  house  it  is  nec- 
essary for  the  exporter  to  fill  out  a  manifest  known  as  the 
"Shipper's  Export  Declaration."  This  export  declaration  is  a 
statement  setting  forth  source  and  destination  of  the  goods  and 
containing  a  complete  description  of  them,  their  quantity  and 
their  value  at  the  time  and  place  of  shipment.  This  manifest 
must  be  sworn  to  by  the  exporter  after  which  it  is  filed  with 
the  collector  of  customs  at  the  port  of  departure.  Eventually 
it  will  form  a  part  of  the  material  from  which  the  government's 
export  statistics  are  made  up. 

"When  merchandise  is  shipped  foreign,  four  copies  of  this 
form  must  be  presented  to  the  collector  of  customs  for  each 
consignment.  The  collector  will  retain  the  original  and  one 
copy  and  deliver  the  other  two  copies  to  the  shipper.  The 
shipper  will  present  one  copy  to  the  steamship  company  and 
deliver  the  other  copy  with  the  goods  to  the  inspector  of  cus- 
toms on  the  dock,  without  which  no  goods  will  be  received. 
The  copy  delivered  to  the  steamship  company  must  accom- 
pany the  goods  on  their  voyage  and  be  delivered  by  the  master 
to  the  American  consular  officer  with  the  manifest  at  the  point 
of  discharge.    The  copy  delivered  to  the  inspector  of  customs 

286 


CUSTOM    HOUSE    EXPORT    PROCEDURE  287 

upon  which  he  will  make  his  notifications  of  short  shipment, 
etc.,  must  be  delivered  to  the  vessel  to  be  attached  to  the  mani- 
fest delivered  to  the  collector  upon  clearance." 

A  condensed  extract  of  the  information  contained  in  the 
"Shipper's  Export  Declaration"  must  also  be  prepared.  This 
extract  is  merely  a  certificate  showing  that  the  shipper's  declar- 
ation is  on  file  at  the  custom  house ;  it  will  be  signed  by 
the  deputy  collector  of  customs  and  addressed  to  the  exporting 
vessel  or  carrier. 

Shipping  Through  an  Agent 

If  as  in  the  case  of  inland  exporters,  the  shipping  trans- 
actions are  conducted  through  an  agent,  this  agent  must  file 
with  the  collector  a  copy  of  his  credentials  signed  by  his  prin- 
cipal. Sometimes  it  is  only  necessary  that  the  principal  confer 
such  authority  by  placing  an  indorsement  on  the  declaration 
itself. 

The  government  considers  all  of  the  information  contained 
In  the  declaration  as  strictly  confidential.  It  is  filed  at  the  cus- 
tom house  and  is  never  disclosed  except  on  the  written  author- 
ity of  the  shipper. 

Shipments  from  the  Interior 

When  the  exporter  who  is  not  located  at  a  seaport  wishes 
to  ship  his  goods  to  a  foreign  country  or  to  colonies  situated 
outside  the  borders  of  the  United  States,  he  prepares  his  declar- 
ation as  though  at  the  seaport  and  delivers  it  to  the  carrier. 
If  his  shipment  is  made  on  a  through  bill  of  lading,  his  declara- 
tion should  be  made  out  at  the  same  time  and  accompany  the 
shipping  papers  to  the  seaport.  If  the  bill  of  lading  Is  a  local 
one,  the  papers  may  be  mailed  separately  to  his  agent  at  the 
seaport,  and  the  agent  will  see  the  goods  through  the  cus- 
tom house.  The  declaration,  being  more  or  less  confidential, 
may  if  it  Is  desirable  be  addressed  directly  to  the  collector  of 


288  THE  TECHNIQUE  OF  FOREIGN  TRADE 

customs.  In  such  case  the  exporter  should  indorse  and  note 
on  the  declaration  that  it  is  sealed.  The  carrier  can  be  given 
the  sealed  envelope  to  deliver  but  the  extract  must  be  sent  un- 
sealed. 

Clearance 

When  the  goods  arrive  at  the  seaboard  the  carrier  delivers 
the  declaration  and  the  extract  to  the  collector  at  the  custom 
house.  He  will  retain  the  declaration,  certify  the  extract,  and 
return  it  to  the  shipper  to  deliver  to  the  exporting  vessel. 

When  the  master  of  the  vessel  bound  to  a  foreign  country- 
has  received  his  certified  extract,  he  notes  on  his  ship's  mani- 
fest the  custom  house  number  appearing  on  the  extract.  When 
each  consignment  has  been  thus  noted  he  is  ready  to  apply 
for  the  clearance  of  his  vessel.  This  will  sometimes  be  granted 
— even  if  the  vessel's  manifest  is  incomplete — on  the  execution 
of  a  bond  to  produce  the  complete  manifest  on  the  day  fol- 
lowing the  vessel's  departure,  together  with  all  the  shippers' 
declarations  that  he  has  received,  in  proper  form.  Within 
fifteen  days  after  the  clearance  of  the  vessel  the  remaining 
declarations  must  be  filed.  Should  there  be  declarations  still 
due  for  merchandise  shipped,  the  master  must  present  with  the 
vessel's  manifesto  a  pro  forma  declaration  enumerating  in 
detail  all  such  shipments. 

Drawback 

It  is  possible  for  the  manufacturer  whose  exports  are  com- 
posed wholly  or  in  part  of  imported  materials  on  which  a  duty 
has  already  been  paid,  to  effect  a  considerable  saving  by  avail- 
ing himself  of  the  privilege  of  "drawback,"  by  which  he  is 
granted  99  per  cent  of  the  duty  thus  paid  when  such  materials 
are  exported  as  a  part  of  his  product. 

The  object  of  the  drawback  law,  which  appears  in  Appen- 
dix A,  is  to  enable  our  manufacturers  to  meet  foreign  com- 


CUSTOM  HOUSE  EXPORT  PROCEDURE      289 

petition  so  far  as  the  cost  of  materials  is  concerned.  If  their 
foreign  trade  were  to  be  handicapped  by  a  high  tariff  on  im- 
ported raw  materials,  the  tariff  might  be  destructive  rather 
than  protective. 

Of  recent  years  the  government  has  been  refunding  as 
drawback  as  much  as  $5,000,000  a  year.  This  money  has  been 
paid  to  the  manufacturers  of  articles  made  of  materials  on 
which  tariff  was  imposed  when  they  were  imported.  Despite 
the  fact  that  there  are  thousands  of  articles  on  which  draw- 
back may  be  legally  obtained,  comparatively  little  has  been 
recovered.  This  is  perhaps  due  to  the  red  tape  which  encumbers 
the  drawback  machinery  though  in  many  cases  it  is  due  to 
ignorance  of  the  possibilities. 

To  obtain  the  benefit  of  drawback  a  formal  application 
must  be  made  to  the  Treasury  Department,  which  will  conduct 
a  special  examination  of  the  applicant's  business.  If  the  in- 
vestigator approves  the  applicant's  claims  as  to  the  proportion 
of  the  imported  products  he  employs  in  the  manufacture  of  a 
given  quantity  of  his  finished  product,  the  Department  grants 
the  claim.  Thereafter  the  manufacturer  is  required  to  keep 
detailed  records  of  the  imported  materials  he  uses  and  must 
submit  to  their  being  verified  by  the ,  government  from  time 
to  time. 

Contrary  to  a  popular  impression  it  is  not  necessary  that 
the  manufacturer  himself  should  have  imported  the  foreign 
products  by  virtue  of  which  he  claims  drawback.  Someone 
else  may  have  paid  the  duty,  but  it  is  necessary  that  he  himself 
should  know  the  port  of  entry  of  the  materials  and  just  what 
duty  was  paid  on  them. 

The  complicated  procedure  of  obtaining  the  drawback 
allowance  has  given  rise  to  a  new  factor  known  as  the  draw- 
back specialist  or  broker  who  will  assume  charge  of  all  the 
details  and  act  as  a  general  intermediary  between  the  govern- 
ment and  the  manufacturer. 


290  THE  TECHNIQUE  OF  FOREIGN  TRADE 

Shipping  in  Bond 

It  is  also  possible  to  save  on  products  for  export  subject 
to  the  United  States  internal  revenue  tax,  if  consumed  in  this 
country,  by  shipping  such  articles  in  bond.  For  instance,  liquors, 
tobacco,  and  certain  other  commodities  can  be  shipped  to  New- 
York  for  export  by  bonded  carriers  without  first  affixing  the 
revenue  stamps.  There  they  are  placed  on  board  the  vessel 
in  bond.  When  they  reach  their  destination  a  certificate  of 
their  delivery  abroad  is  filled  out  and  returned  to  this  country 
whereupon  the  bond  is  canceled. 

This  arrangement  makes  it  possible  to  offer  such  goods  to 
the  foreign  market  at  a  far  lower  figure  than  prevails  even  in 
the  domestic  market  and  to  realize  an  exceptional  profit  at 
the  same  time. 

On  shipments  under  any  form  of  customs  bond  the  ship- 
per's export  declaration  is  not  required  as  the  customs  papers 
covering  the  shipment  furnish  all  the  necessary  statistical  data. 


CHAPTER    XXXVI 

THE  PRINCIPLES  AND  LAWS  OF  MARINE 

INSURANCE 

Marine  Insurance 

A  marine  insurance  policy  is  not  only  desirable  but  indis- 
pensable for  all  ocean  shipments  save  where  the  consignee  or 
buyer  directs  otherwise.  Legal  conditions  in  ocean  shipping 
are  radically  different  from  those  prevailing  on  land.  A  rail- 
road company  is  liable  to  the  owner  for  nearly  every  kind  of 
damage  that  may  befall  the  shipment  while  it  is  in  the  custody 
of  the  carrier.  A  steamship  company  is  seldom  liable  for  any 
claim  for  loss,  so  that  about  95  per  cent  of  the  risk  must  be 
borne  by  the  owner  of  the  goods. 

If  a  cargo  is  injured  in  loading  or  unloading  the  company 
may  recognize  a  claim  for  damages,  provided  however,  that 
the  owner  can  show  that  his  goods  were  properly  packed,  which 
is  always  a  difficult  matter.  But  if  the  ship  is  stranded  or  is 
damaged  by  storm,  fire,  or  collision,  or  is  lost  at  sea,  the  com- 
pany is  in  no  way  liable  to  the  shipper.  If  some  goods  on 
board  are  thrown  overboard  to  save  the  rest,  the  company  may 
levy  "general  average"  against  the  cargo  which  is  saved  in 
favor  of  the  owner  of  the  damaged  goods  or  merchandise 
which  was  sacrificed  to  effect  the  saving  of  the  property  of 
others.  This  principle  has  been  in  effect  for  thousands  of 
years  and  is  the  earliest  example  of  insurance  of  which  there 
is  any  record. 

The  ship-owner  is  not  charged  with  the  same  responsibility 
as  in  the  case  of  carriers  on  land,  for  the  reason  that  he  under- 
takes extraordinary  risks.    By  his  assumption  of  such  risks  and 

291 


292  THE  TECHNIQUE  OF  FOREIGN  TRADE 

his  continuance  in  a  profession  so  hazardous  to  himself,  he  is 
held  to  confer  a  great  benefit  on  the  community  which  he 
serves.  This  custom  of  not  charging  the  mariners  with  re- 
sponsibility has  been  established  from  time  immemorial,  origin- 
ating at  a  time  when  no  one  dreamed  that  vessels  could  be  pro- 
pelled by  power  generated  within  the  vessel  itself. 

The  Origin  of  Marine  Insurance 

The  origin  of  insurance  laws  and  customs  is  lost  in  the 
obscurity  of  the  past.  Our  insurance  law  in  America  is  taken 
entirely  from  the  British  judicature. 

The  oldest  insurance  company  in  the  world  is  Lloyds  which 
was  founded  in  the  year  1770,  but  contrary  to  the  common 
impression  Lloyds  does  not  take  risks  as  does  the  ordinary 
insurance  company.  It  acts  simply  as  agent.  Its  headc[uarters 
are  at  the  Royal  Exchange  in  London  where  all  the  principal 
marine  insurance  brokers  have  their  offices  or  desks.  When 
risk  is  to  be  assumed  a  "slip"  is  passed  around  and  a  number 
of  these  brokers  "take  a  line,"  that  is,  underwrite  for  a  certain 
amount  which  rarely  exceeds  $1,000.  By  this  arrangement  any 
loss  which  may  occur  is  borne  by  a  considerable  number  of 
underwriters  and  their  proportionate  risk  is  fairly  small. 

Fundamental  Regulations 

The  rates  vary  according  to  the  cargo,  destination,  and 
character  of  the  vessel.  Usually  all  sorts  of  clauses  are  writ- 
ten into  the  policy,  providing  for  all  sorts  of  emergencies. 
An  ordinary  policy  does  not  cover  loss  from  pilferage,  nor 
claims  for  damages  on  all  classes  of  goods,  so  that  many  pro- 
visions must  be  added  to  make  the  poHcy  really  cover  the  risk. 

The  simplest  form  of  policy  covers  damages  in  cases  where 
the  vessel  is  stranded,  burned,  or  sunk  in  collision.  It  also  in- 
cludes damages  for  all  general  averages  and  salvage  charges 
that  may  be  assessed  on  the  goods. 


MARINE    INSURANCE  293 

Insurance  does  not  usually  cover  the  goods  for  the  full 
period  of  transit  up  to  the  time  of  delivery  to  the  consignee, 
unless  such  arrangements  are  specifically  made. 

Ordinarily  the  policy  covers  only  the  risk  from  the  time  the 
goods  are  actually  laden  until  they  are  discharged  at  the  port 
of  destination. 

If  goods  delivered  to  the  ship's  pier  are  to  remain  on  the 
dock  for  some  length  of  time,  it  is  always  desirable  to  insure 
them  against  loss  by  fire  or  damage  through  exposure. 

All  goods  are  assumed  to  be  shipped  under  deck  unless 
otherwise  stated  when  application  for  insurance  is  made. 
When  goods  are  shipped  on  deck  the  insurer  must  be  notified, 
as  deck  goods  are  insured  free  of  claims  arising  from  the  ex- 
posure of  goods  to  the  elements. 

The  Agents 

Marine  insurance  is  frequently  effected  and  losses  are  ad- 
justed through  the  agency  of  insurance  brokers  and  other 
factors;  therefore  it  becomes  necessary  to  know  the  law  gov- 
erning the  acts  of  these  agents. 

An  insurance  agent  may  be  appointed  by  an  instrument  in 
writing  or  impliedly  by  the  course  of  business  and  correspond- 
ence between  himself  and  the  principal. 

In  England  a  broker  is  held  responsible  by  the  underwriter 
for  the  payment  of  the  shipper's  premium,  but  the  United 
States  laws  hold  the  shipper  himself,  and  not  the  broker,  re- 
sponsible for  such  payment.  By  virtue  of  a  special  agreement, 
however,  a  broker  in  the  United  States  may  make  himself  the 
debtor  of  the  underwriter  or  a  creditor  of  the  shipper;  in  other 
words,  he  becomes  the  responsible  party  only  by  special  agree- 
ment. 

The  policy-broker  usually  keeps  a  running  account  with  the 
assured  by  whom  he  is  employed,  charging  premiums  on  his 
risks.    This  account  is  settled  between  the  parties  periodically. 


294  THE  TECHNIQUE  OF  FOREIGN  TRADE 

Similar  running  accounts  are  kept  by  agents,  factors,  and  cor- 
respondents of  assured  and  underwriters,  in  so  far  as  the  busi- 
ness of  insurance  is  transacted  by  the  agents. 

Important  Features  of  Marine  Insurance 

It  is  well  to  remember  the  following  principles  in  connec- 
tion with  marine  insurance: 

1.  The  same  person  may  be  the  agent  of  both  the  assured 
and  underwriters. 

2.  Insurance  on  the  property  of  a  firm  may  be  effected  by 
either  partner  of  the  firm,  but  unless  one  member  only  is  active 
in  the  direction  of  the  enterprise,  the  prevailing  rule  is  that 
one  alone  has  no  authority  to  insure  for  both, 

3.  A  consignee  acting  merely  as  the  factor  of  the  con- 
signor has  no  authority  as  such  to  effect  insurance  on  the  object 
consigned  to  him,  which  is  in  transit.  But  after  the  goods  have 
come  into  the  hands  of  the  consignee,  he  may  be  bound  to 
effect  insurance  by  the  custom  in  like  cases,  or  by  other  cir- 
cumstances which  would  make  it  advisable  for  a  merchant  of 
ordinary  business  intelligence  and  diligence  to  take  such  action. 

4.  A  party  in  the  possession  of  the  property  as  an  agent 
or  trustee  with  general  authority  as  to  the  management  of  it, 
is  the  party  to  effect  insurance,  if  the  circumstances  are  such 
that  the  principal  or  the  party  interested  in  the  property  has 
no  opportunity  to  instruct  him. 

5.  The  delivery  of  the  policy  to  a  person  at  his  request  con- 
stitutes him  an  agent.  This  agency  continues  while  the  policy 
remains  in  his  possession  as  agent  and  he  is  bound  to  attend  to 
the  matters  relating  to  such  policy.  But  if  the  undertaking  is 
gratuitous  such  party  is  not  liable  as  agent. 

6.  The  revocation  of  the  authority  of  the  agent  will  not 
defeat  any  agreement  he  may  have  made  for  the  insurance 
before  such  revocation. 

7.  Notice  of  loss  communicated  to  the  agent  of  the  insur- 


MARINE    INSURANCE  295 

ance  company  is  binding  upon  the  company,  even  though  not 
communicated  to  them  by  the  agent. 

8.  It  has  been  held  that  there  are  three  instances  in  which 
the  order  to  insure  for  a  correspondent  abroad  must  be  obeyed. 
These  are: 

(a)  Where  a  merchant  abroad  has  effects  in  the  hands  of 

his  correspondent  in  the  United  States. 

(b)  If  the  correspondent  has  effected  insurance  on  pre- 

vious occasions  for  his  principal  abroad. 

(c)  If  the  merchant  abroad  sends  bills  of  lading  with  an 

order  to  insure,  the  correspondent  in  the  United 
States  must  obey  or  himself  be  liable. 

9.  If  an  agent  neglects  to  insure  goods  when  it  becomes 
necessary  to  do  so,  he  is  personally  liable  to  his  principal  in 
the  capacity  of  an  underwriter. 

10.  If  the  agent  does  not  comply  with  the  instructions  of 
his  principal,  he  is  liable  for  damages. 

11.  A  general  mercantile  agent,  who  in  the  course  of  his 
agency  takes  a  policy  for  his  principal  and  retains  it  in  his 
possession,  has  a  lien  upon  it  for  the  general  balance  of  his 
account,  as  an  agent  against  his  principal. 

12.  The  agent  forfeits  his  lien  by  parting  with  the  policy. 
It  may  also  be  noted  that  an  agent  abroad  can  insure  goods 

exposed  to  extraordinary  risks  or  when  it  is  customary  to  in- 
sure them  and  thereby  bind  his  principal. 

In  determining  the  liability  of  the  principal  or  the  agent, 
and  also  in  the  construction  of  the  terms  of  a  marine  insurance 
policy,  the  existing  custom  and  usage  are  the  important  factors. 

Liability  of  Steamship  Companies 

An  act  of  Congress,  of  February  13,  1893,  called  the  Harter 
Act,  defines  the  Hability  of  ocean  carriers  as  follows: 

"If  the  owner  of  any  vessel  transporting  merchandise  or 


296  THE  TECHNIQUE  OF  FOREIGN  TRADE 

property  to  or  from  any  port  in  the  United  States  of  America 
shall  exercise  the  diligence  to  make  the  said  vessel  in  all  re- 
spects seaworthy  and  properly  manned,  equipped  and  supplied, 
neither  the  vessel,  her  owner  or  owners,  agent  or  charterers, 
shall  become  or  be  held  responsible  for  damages  or  loss  result- 
ing from  faults  or  errors  in  navigation,  or  in  the  management 
of  said  vessel,  nor  shall  the  vessel,  her  owner  or  owners,  char- 
terers, agent  or  master  be  held  liable  for  losses  arising  from 
damages  of  the  sea  or  other  navigable  waters,  acts  of  God  or 
public  enemies,  or  the  inherent  defect,  quality  or  vice,  of  the 
thing  carried,  or  from  insufficiency  of  package,  or  seizure  under 
legal  process,  or  from  loss  resulting  from  any  act  or  omission 
of  the  shipper  or  owner  of  the  goods,  his  agent  or  representa- 
tive, or  from  saving  or  attempting  to  save,  life  or  property  at 
sea,  or  from  any  deviation  in  rendering  such  service." 

The  law  applies  to  coastwise  shipping  as  well  as  to  the  ship- 
ping between  domestic  and  foreign  ports.  The  carrier  is  bound 
to  supply  a  seaworthy  boat  and  the  officers  and  crew  must  be 
chosen  with  reasonable  care.  He  is  liable  for  all  damages  aris- 
ing from  negligence  in  loading,  stowage,  or  proper  decking  of 
the  cargo.  The  ship-owner  is  not  held  liable,  however,  for 
negligence  of  officers  and  crew  in  navigating  the  vessel. 

Abandonment 

An  abandonment  is  an  act  on  the  part  of  the  assured  by 
which  he  relinquishes  and  transfers  to  the  underwriters  his 
insurable  interest  or  the  proceeds  thereof,  or  the  claims  arising 
therefrom,  in  so  far  as  they  are  covered  by  the  policy.  It  is 
requisite  only  in  case  of  technical  or  constructive  total  loss. 
When  there  is  nothing  remaining  which  can  be  assigned  or 
transferred,  an  abandonment  is  not  necessary. 

A  constructive  or  technical  total  loss  exists  when  a  part  or 
remnant  of  the  object  insured  exists,  or  some  claim  accrues 
from  it  against  third  persons.     When  a  damaged  vessel  has 


MARINE    INSURANCE  297 

been  repaired  and  is  bottomried  for  the  expense  of  the  repairs, 
the  owner  cannot  recover  without  abandonment. 

In  the  United  States  the  ship  and  freight  are  treated  as 
distinct  interests  in  considering  abandonment.  According  to 
American  procedure  if  any  part  of  the  freight  is  earned  before 
the  event  happens  there  exists  the  right  to  abandon  freight. 
No  special  form  of  abandonment  is  necessary,  and  it  need  not 
be  in  writing  to  be  binding,  but  the  notice  must  be  positive  and 
absolute  in  its  tenor. 

Settlements  of  Averages 

Losses  are  general  or  particular — partial  or  total. 

General  average  is  based  upon  the  sacrifices  made,  expenses 
incurred,  or  damage  sustained  for  the  common  benefit.  It  pre- 
supposes only  partial  loss,  the  assessment  for  such  loss  being 
made  on  the  owners  of  the  surviving  cargo.  When  a  general 
average  is  fairly  settled  in  a  foreign  port,  and  the  assured  is 
obliged  to  pay  his  proportion  of  it,  he  may  recover  the  amount 
from  the  insurer,  though  the  average  may  have  been  settled 
in  a  different  manner  than  it  would  have  been  at  the  home  port. 
(Depau  V.  Ocean  Ins.  Co.,  5  Co  wen  63.) 

A  particular  average,  so  called  in  distinction  from  a  general 
average  to  which  different  parties  contribute,  is  a  loss  borne 
wholly  by  the  party  upon  whose  property  it  takes  place. 

If  goods  are  to  be  insured  subject  to  particular  average  it 
must  be  so  provided  in  the  application  for  insurance. 

Under  the  British  law,  loss  is  computed  as  "such  proportion 
of  the  sum  fixed  by  the  policy  as  the  difference  between  the 
gross  sound  and  damaged  values  at  the  place  of  arrival  bears 
to  the  gross  sound  value." 

Valued  and  Open  Policies 

Insurance  is  a  contract  under  which  the  underwriters  are 
bound  to  pay  only  the  losses  actually  sustained.    In  case  of  loss. 


298  THE  TECHNIQUE  OF  FOREIGN  TRADE 

the  purpose  of  marine  insurance  is  to  restore  the  assured  as 
nearly  as  possible  to  the  condition  in  which  he  was  at  the  out- 
set. The  amount  of  insurable  interest  in  goods  is  their  market 
value  at  the  time  and  place  of  the  commencement  of  the  risk. 
Should  goods  be  insured  for  a  certain  amount  in  a  foreign  cur- 
rency and  later  be  lost  at  sea,  the  amount  paid  to  the  shipper 
by  the  insurance  company  would  be  determined  by  the  rate  of 
exchange  at  the  time  the  goods  were  shipped,  regardless  of 
the  rate  of  exchange  prevailing  at  the  time  of  their  loss. 

A  valued  policy  is  one  in  which  the  value  of  the  goods  in- 
sured is  agreed  upon  between  parties.  This  valuation  is  bind- 
ing upon  the  parties  if  made  without  fraud  or  illegality  and 
proof  of  value  is  not  necessary  in  order  to  recover. 

An  open  policy  is  one  in  which  the  goods  insured  are  not 
estimated  in  the  contract  at  any  particular  amount  or  rate.  In 
such  case  the  value  is  open  to  inquiry  and  proof  and  must  be 
proved  by  the  assured  before  he  can  recover  his  loss.  In  this 
type  of  policy  the  amount  of  insurable  interest  is  the  value  of 
the  goods  in  the  market  at  the  beginning  of  the  risk  and  it 
continues  the  same  while  insurance  is  in  force.  A  valuation  at 
a  certain  rate  per  pound  refers  to  the  pound  of  the  place  where 
the  policy  is  made. 

Marine  insurance  is  most  complicated  and  involved.  A  full 
and  complete  treatment  of  the  subject  is  obviously  impossible 
in  a  general  work  on  foreign  trade.  This  chapter  has  treated 
but  a  few  of  its  more  salient  features. 


CHAPTER    XXXVII 
FINANCING  FOREIGN  SHIPMENTS 

Methods  of  Export  Payment 

The  methods  of  financing  foreign  trade  are  the  same  in 
principle  as  those  used  in  domestic  trade;  all  are  reducible  to: 

1.  Cash  with  order. 

2.  Bank  credit. 

3.  Open  accounts. 

4.  The  use  of  negotiable  paper,  commonly  termed  "bills 

of  exchange." 

Much  the  greater  part  of  the  financing  of  foreign  ship- 
ments is  carried  on  by  means  of  the  fourth  method  which  will 
be  discussed  in  detail  after  brief  consideration  is  given  to  the 
first  three  methods. 

Cash  with  Order 

From  the  collection  department's  point  of  view,  cash  with 
the  order  is  the  ideal  procedure;  from  the  point  of  view  of 
the  selling  force  it  is  an  impossible  method.  No  foreign  dealer 
will  willingly  tie  up  his  money  in  goods  that  will  not  reach 
him  until  three  and  perhaps  six  months  after  he  has  sent  his 
order  and  which  he  may  not  be  able  to  sell  until  another  six 
months  have  elapsed.  Moreover,  the  exporter  may  be  just  as 
unknown  to  the  foreign  buyer  as  the  foreign  buyer  is  to  the 
exporter.  If  the  reputation  of  both  parties  does  not  extend 
beyond  their  home  towns  and  both  have  to  rely  upon  agency 
reports,  the  demand  for  cash  with  order  is  likely  to  arouse 
distrust  in  the  mind  of  the  buyer  in  addition  to  resentment. 
Then  any  chance  of  doing  business  vanishes.     The  exporter 

209 


30O  THE  TECHNIQUE  OF  FOREIGN  TRADE 

may  as  well  eliminate  this  method  from  his  plan  of  proce- 
dure and  concern  himself  only  with  those  methods  of  bank 
credits  by  means  of  which  the  purchaser  while  not  paying 
actual  cash,  can  both  afford  the  exporter  protection  and  enable 
him  to  receive  his  money  promptly. 

The  demand  for  cash  with  the  order  may  be  justifiable 
when  samples  are  requested  for  which  a  nominal  payment  is 
enforced  to  prevent  abuse  of  the  privilege,  but  in  no  other 
case. 

Bank  Credit 

A  bank  credit  is  simply  a  guarantee  of  payment  by  the 
bank.  While  there  are  innumerable  variations  in  the  forms 
of  foreign  credits  in  principle,  they  all  amount  to  this.  The 
customer  (buyer  or  importer)  goes  to  his  banker  and  arranges 
for  a  payment  or  payments,  not  exceeding  a  certain  sum, 
to  be  made  by  a  bank  in  a  foreign  coimtry  to  a  designated  per- 
son (the  exporter)  when  the  latter  has  produced  documentary 
and  any  other  requisite  evidence  that  he  has  fulfilled  certain 
conditions  of  sale.  Whether  or  not  the  importer  is  able  to 
arrange  for  such  a  credit  depends,  of  course,  wholly  upon  his 
business  standing.  If  his  credit  is  good,  and  the  amount  of 
his  bank  balance  is  normally  sufficient  to  cover  the  amount  of 
the  credit  asked  for,  his  bank  will  be  willing  to  extend  the 
facility  for  a  small  commission,  plus  interest  on  the  amount 
paid  to  the  exporter  until  its  repayment  by  the  importer.  If 
the  latter 's  rating  is  poor  or  if  the  amount  of  the  credit  he 
asks  for  is  disproportionate  to  his  normal  bank  balance,  his 
banker  will  probably  require  security  of  some  kind  or  a  cash 
payment.  But  even  the  last  course  is  preferable  to  cash  with 
the  order,  as  the  importer  need  not  actually  pay  until  the  goods 
are  shipped,  and  may  arrange  in  the  country  of  export  for  such 
inspection  of  the  goods  as  he  deems  prudent  and  necessary  be- 
fore this  payment  is  made. 


FINANCING    FOREIGN    SHIPMENTS  30T 

It  should  be  noted  that  when  the  foreign  buyer  arranges 
for  a  bank  credit  in  this  country  he  should  request  that  the 
credit  be  "confirmed."  This  means  that  the  bank  which  is  to 
pay  for  the  goods  advises  the  exporter  to  whom  payment  is  to 
be  made  that  a  credit  has  been  opened  in  his  favor.  Banks 
do  not  as  a  rule  notify  the  persons  to  whom  they  are  author- 
ized to  extend  credit  of  the  fact  unless  it  is  stated  that  the 
credit  is  to  be  confirmed. 

This  method  of  payment,  which  is  known  as  "cash  against 
documents,"  is  not  very  desirable  from  the  customer's  stand- 
point and  he  usually  resents  the  request  for  a  bank  credit. 

When,  however,  the  customer's  reputation  is  not  good  or 
when  business  conditions  in  the  foreign  country  are  so  un- 
settled or  panicky  that  ordinary  prudence  requires  some  guar- 
antee of  payment  before  the  goods  leave  the  exporter's  hands, 
then  the  suggestion  of  a  bank  credit  will  usually  be  favor- 
ably considered  by  the  customer  and  will  protect  the  exporter 
in  every  way. 

Bank  credits  cannot  be  generally  demanded  by  any  house 
ambitious  to  become  a  world  trader  or  even  to  have  a  mod- 
erately extensive,  direct  foreign  business.  Success  in  the 
world's  trade  of  the  future  will  largely  rest  upon  the  exten- 
sion of  credit,  and  the  American  exporter,  to  be  successful, 
must  needs  call  upon  his  ingenuity  and  ways  and  means  for 
such  extension  of  credit  to  foreign  buyers  as  will  be  just  as 
satisfactory,  if  not  more  so,  than  the  terms  offered  by  his  com- 
petitors in  other  countries. 

Open  Accounts 

The  necessary  delay  and  the  added  risk  involved  in  open 
accounts  makes  this  prevailing  method  of  financing  domestic 
trade  almost  as  unpopular  in  foreign  commerce  as  cash  pay- 
ments— excepting  in  rare  instances.  Such  an  instance  might 
be  that  of  two  concerns  with  ample  resources  to  draw  upon 


302  THE  TECHNIQUE  OF  FOREIGN  TRADE 

doing  a  mutual  and  regular  amount  of  business  between  their 
two  countries.  In  such  a  case  remittances  would  be  arranged 
for  at  regular  intervals,  the  credit  not  to  exceed  a  stipulated 
amount.  The  remittance  might  be  in  the  form  of  a  banker's 
draft,  i.e.,  a  check  on  a  foreign  bank,  or  it  might  be  made  by 
the  ordinary  commercial  draft,  i.e.,  bill  of  exchange. 

Another  method  of  operating  such  an  account,  termed 
"open  credit,"  is  when  the  export  house  gives  its  foreign  cus- 
tomer a  6  months'  credit,  say  for  $25,000,  charging  all  orders 
received  during  the  6  months  to  this  account,  and  adding  to 
this  charge  a  small  commission  of  3  or  5  per  cent.  The  cred- 
itor usually  charges  the  customer  an  additional  6  per  cent  on 
sums  actually  charged  against  his  account  and  credits  him 
with  6  per  cent  interest  on  his  remittances.  Owing  to  the 
frecjuent  turning  over  of  the  account,  these  charges,  together 
with  the  commission,  may  amount  to  a  profit  of  from  6  to  10 
per  cent  on  the  total  credit  during  the  year. 

This  method  of  open  credit  business,  which  dates  from 
the  earliest  period  of  the  actual  exchange  of  commodities  be- 
tween foreign  houses,  has  now  been  generally  superseded  by 
the  use  of  the  bill  of  exchange  mentioned  above. 

Bills  of  Exchange 

The  burden  of  financing  "long  distance"  transactions  may 
be,  and  with  rare  exceptions  for  reasons  to  be  presently  ex- 
plained, usually  is,  placed  upon  the  bank  with  foreign  affilia- 
tions where,  in  consequence  of  such  affiliations,  the  burden 
properly  belongs.  As  previously  stated,  the  exporter  is  nat- 
urally reluctant  to  tie  up  his  capital  In  goods  while  they  travel 
on  a  tramp  steamer  perhaps  half-way  around  the  world  and 
payment  for  which  may  take  several  months  to  reach  him,  even 
assuming  that  the  customer  promptly  remits  on  the  arrival  and 
inspection  of  the  goods.  The  customer  on  his  part  is  equally 
reluctant  to  pay  for  goods  before  they  have  left  their  country 


FINANCING    FOREIGN    SHIPMENTS  303 

of  origin — goods  which  he  may  be  unable  to  handle  and  turn 
into  cash  for  several  months  to  come.  So  a  way  out  of  the  diffi- 
culty is  found  by  recourse  to  the  negotiable  form  of  instru- 
ment called  "bill  of  exchange."  When  the  credit  of  both  par- 
ties to  the  transaction  is  well  established  this  instrument  from 
the  exporter's  point  of  view  is  almost  as  satisfactory  as  cash 
itself ;  to  the  buyer  it  furnishes  all  the  credit  to  which  his  rating 
entitles  him. 

Negotiable  Instruments 

Some  confusion  may  exist  as  to  the  precise  distinction 
between  the  negotiable  instruments  known  as  banker's  draft, 
draft  or  bill  of  exchange,  trade  acceptance,  bank  acceptance, 
and  promissory  note. 

A  banker's  draft,  as  already  noted,  is  practically  the  same 
thing  as  an  ordinary  check,  in  that  it  is  an  order  for  payment 
by  one  bank  on  another  in  favor  of  the  person  w4iose  name 
is  designated  thereon. 

A  draft  is  an  order  from  one  person  (the  seller)  request- 
ing another  (the  buyer)  to  pay  a  certain  sum  of  money  either 
at  sight  or  at  a  future  date  to  a  third  party  which  is  usually  the 
bank  designated  thereon.  This  is  the  ordinary  domestic  draft 
with  w^hich  all  business  men  are  familiar.  When  a  draft  is 
drawn  on  a  person  doing  business  in  a  foreign  country  it  is 
known  as  a  bill  of  exchange.  When  the  person  on  whom  the 
draft  is  drawn  receives  it  and  adds  his  signature  thereto,  he 
"accepts"  liability  for  the  sum  designated  thereon.  The  bill 
of  exchange  then  becomes  a  negotiable  "acceptance"  and  in  its 
legal  aspects  is  exactly  the  same  kind  of  document  as  a  domes- 
tic trade  acceptance.  Thus  the  only  difference  between  the  two 
(aside  from  a  slight  difference  in  wording  to  be  discussed  pres- 
ently) is  that  a  trade  acceptance  is  a  domestic  medium  of 
exchange  negotiable  in  this  country,  whereas  a  bill  of  exchange 
is  finally  negotiable  abroad. 


304  THE  TECHNIQUE  OF  FOREIGN  TRADE 

When  the  payment  of  the  bill  is  guaranteed  by  a  bank,  as 
is  frequently  done  under  the  conditions  to  be  presently  ex- 
plained, it  becomes  a  bank  acceptance.  This  form  of  bill,  be- 
cause of  the  security  as  to  its  payment,  is  negotiable  in  any 
of  the  money  markets  of  the  world  and  is  worth  the  face 
value  of  the  currency  it  designates,  less  the  discount. 

A  promissory  note  is  merely  a  promise  by  its  makers  to 
pay  and,  unless  indorsed  by  others,  offers  only  the  security 
of  the  maker.  A  trade  acceptance  must  be  drawn  by  the  seller 
on  the  purchaser  for  goods  sold;  a  bill  of  exchange  is  usually 
drawn  in  the  same  way  for  value  received,  which  value  gen- 
erally represents  goods  sold,  the  wording  being  immaterial. 
The  goods  are  usually  named  in  the  bill.  The  usage  in  Great 
Britain,  the  pioneer  in  the  use  of  bills  of  exchange,  is  to  em- 
ploy the  last-named  term,  while  in  this  country  the  term,  trade 
acceptance,  is  now  in  general  use. 

Trade  Acceptance 

It  may  here  be  noted  that  a  trade  acceptance  is  not  a  new 
business  device,  but  only  a  new  name  for  a  particular  kind  of 
bill  of  exchange.  Prior  to  the  Civil  War  the  domestic  draft 
or  bill  of  exchange  was  widely  employed  in  closing  ordinary 
merchandising  transactions.  These  drafts  were  trade  accept- 
ances in  the  true  sense  of  the  term,  but  ordinarily  were  not 
so  called;  they  were  known  as  drafts  or  bills  of  exchange, 
domestic  or  foreign,  and  when  accepted  were  called  "accept- 
ances" or  "accepted  bills." 

Before  the  Civil  War  ordinary  credit  transactions  neces- 
sarily involved  longer  terms  than  at  present  because  of  the 
lack  of  modern  means  of  rapid  communication.  That  war 
caused  a  great  disturbance  to  the  whole  financial  system  of  the 
country  and  introduced  new  fiscal,  financial,  banking,  and 
credit  situations.  The  new  paper  money — the  greenback — 
which  was  issued  at  that  time,  fluctuated  greatly  In  purchasing 


FINANCING    FOREIGN    SHIPMENTS 


305 


power  with  the  changing  fortunes  of  the  war  and  as  this 
paper  money  was  not  only  the  measure  and  standard  of 
value  temporarily,  but  also  the  chief  medium  of  exchange 
in  everyday  transactions,  the  check  being  comparatively 
undeveloped,  the  risk  and  uncertainty  of  long-time  credits  was 
considerable  and  losses  were  heavy.  This  situation  led  busi- 
ness men  to  offer  large  discounts  to  induce  their  customers  to 
make  prompt  settlements  in  cash.  As  a  result  the  open-book 
account  with  its  accompaniments,  the  cash  discount  and  single- 
name  paper,  came  into  wide  use  superseding  in  large  measure 
the  domestic  bill  of  exchange.  Furthermore,  the  national 
banking  system  created  in  1863  made  no  provision  for  making 
or  rediscounting  acceptances,  a  great  handicap  which  has  now 
been  removed  by  the  rediscount  and  related  privileges  of  the 
federal  reserve  system. 

The  Use  of  Trade  Acceptances 

The  advantage  of  the  trade  acceptance  as  created  and  used 
in  domestic  commerce  is  shown  by  the  following  example: 

A  firm  in  Boston  buys  from  a  firm  in  New  York  $1,000 
worth  of  goods.  Simultaneously  with  the  shipment  the  seller 
draws  on  the  buyer  a  draft  at  90  days  from  date  or  sight  (ac- 
cording to  the  terms  of  sale)  and  mails  it  to  the  latter  with 
the  invoice  and  the  bill  of  lading.  The  usual  form  of  draft 
is  used  with  this  additional  clause:  "the  obligation  of  the 
acceptor  hereof  arises  out  of  the  purchase  of  goods  from  the 
drawer." 

The  buyer  accepts  the  draft  by  writing  across  the  face  of 

it,  "Accepted. Payable  at Bank,  Boston." 

He  dates  and  signs  this  acceptance  and  returns  the  accepted 
draft  to  the  seller  in  New  York.  The  document  is  now  a 
"trade  acceptance,"  becoming  due  for  payment  in  Boston  90 
days  from  the  date  of  the  draft,  if  drawn  "after  date,"  but 
in  90  days  from  date  of  acceptance,  if  drawn  "90  days'  sight." 


3o6  THE  TECHNIQUE  OF  FOREIGN  TRADE 

If  the  seller  requires  the  money  represented  by  this  accept- 
ance he  may  take  the  accepted  draft  to  his  bank  and  the  bank 
will  purchase  it,  provided  the  names  appearing  thereon  seem 
satisfactory.  The  bank  in  turn  may  rediscount  the  acceptance 
with  the  federal  reserve  bank,  as  the  obligation  arises  out  of 
the  purchase  of  goods,  and  thus  falls  under  the  provisions  of 
the  Federal  Reserve  Act.  The  market  rate  of  discount  is 
charged  by  the  bank  for  its  courtesy. 

Documentary  Drafts 

The  bill  of  exchange  differs  from  the  trade  acceptance 
only  in  the  method  of  its  handling.  If  the  exporter  wishes  to 
realize  on  his  shipment  as  soon  as  the  goods  have  been  dis- 
patched, he  collects  all  the  documents  required  to  prove  title 
thereto — bill  of  lading,  insurance  policy,  consular  invoice,  and 
so  on — attaches  them  to  the  draft  and  presents  them  to  his 
banker.  The  banker  is  usually  willing  to  advance  from  50  to 
90  per  cent  of  the  amount  of  the  Invoice,  and  in  some  cases 
the  full  amount  on  the  strength  of  the  security  offered — the 
title  to  the  goods  until  payment  for  them  is  made.  Whether 
or  not  the  bank  has  a  foreign  trade  department  and  thus  has 
affiliations  abroad  which  will  enable  it  to  present  the  draft  and 
collect  its  value  at  the  lowest  possible  expense,  is  immaterial. 
If  it  is  a  small-town  bank  not  equipped  to  do  such  business, 
the  documents  are  forwarded  to  an  export  bank.  The  exporter 
may  have  to  pay  an  extra  commission  for  this  service,  but  if 
his  foreign  trade  is  relatively  small  he  may  nevertheless  prefer 
to  deal  with  his  local  bank. 

It  should  be  clearly  understood  that  when  an  exporter  sells 
his  documents  for  cash  in  this  way,  the  transaction  is  neither 
a  sale  nor  a  discount.  It  simply  represents  a  loan  or  advance 
by  the  banker  on  the  security  of  the  goods  in  shipment  and 
the  probity  of  the  exporter.  If  the  goods  are  staple  commo- 
dities and  readily  salable  at  their  place  of  destination,   the 


FINANCING    FOREIGN    SHIPMENTS  307 

banker  will  generally  advance  90  per  cent  of  their  value,  re- 
gardless of  the  credit  rating  of  either  seller  or  buyer.  If  the 
rating  of  both  buyer  and  seller  are  highly  satisfactory  the 
banker  may  advance  the  full  amount  of  the  invoice,  especially 
if  the  charges  for  collection  and  exchange  are  to  be  paid  by  the 
acceptor  and  thus  to  be  added  to  the  face  value  of  the  draft. 
If  the  goods  are  specialties  or  machinery  which  under  a  forced 
sale  may  have  little  or  no  market,  the  banker  may  allow  only 
half  the  invoice  price.  But  as  the  bank  can  recover  the  loan 
from  the  exporter  if  the  buyer  will  not  accept  the  draft  and 
the  goods  are  thrown  back  on  the  shipper's  hand,  the  full  value 
of  the  invoice,  less  probable  expenses  and  the  commission,  is 
often  advanced  by  the  bank  to  its  regular  customers. 

Bank  Acceptance 

When  the  foreign  importer  has  ample  resources  he  may 
instruct  his  own  bank  to  establish  his  credit  abroad  for  a  cer- 
tain amount  by  authorizing  a  bank  in  the  exporting  country 
to  pay  drafts  drawn  upon  him  by  that  country's  shippers.  This 
authorization  is  the  bank  credit  already  referred  to.  In  any 
such  cases  the  correspond^t  bank  places  its  acceptance  on  the 
seller's  drafts  which  are  then  readily  negotiated  in  the  open 
market  at  current  rates  of  discount.  Such  bank  acceptances 
are  usually  sold  on  the  discount  market  either  in  this  country 
or  abroad. 

Sometimes  the  importer  arranges  with  a  bank  in  his  own 
country  to  honor  drafts  made  upon  him  by  exporters,  or,  if 
he  is  doing  business  on  a  large  scale,  he  may  open  an  accep- 
tance credit  with  a  bank  in  any  of  the  great  financial  centers 
abroad,  irrespective  of  the  points  of  shipment.  In  that  case 
the  credit  is  opened  in  dollars,  pounds,  or  francs,  as  may  be 
most  profitable  in  effecting  exchanges  and  in  taking  advan- 
tage of  current  rates  of  discount.  Under  such  an  arrange- 
ment, the  exporter  in  this  country  draws  against  the  accep- 


3o8  THE  TECHNIQUE  OF  FOREIGN  TRADE 

tance  bank  abroad  and  sells  the  draft,  with  the  full  set  of  docu- 
ments, to  his  own  bank.  The  bank  purchasing  the  draft  sends 
it  for  acceptance  to  the  bank  abroad  and  the  accepting  bank 
looks  of  course  to  the  importer  or  to  his  bank  for  reimburse- 
ment at  maturity. 

The  exporter  is  not  concerned  with  the  arrangements  the 
importer  has  made  with  his  bank  in  order  to  obtain  credit. 
It  may  be  that  the  bank  will  not  deliver  the  goods  to  the  pur- 
chaser until  the  latter  pays  for  them;  or  it  may  deliver  only 
part  of  the  goods  to  the  importer  and  until  these  are  sold  and 
paid  for  may  refuse  to  deliver  the  rest. 

Financing  the  Import  Shipment 

The  methods  of  financing  imports  have  been  indicated 
more  or  less  fully  in  connection  with  export  shipments  since 
one  method  is  obviously  indicated  by  the  other. 

Drafts  in  payment  of  imports  may  be  time  or  sight,  with 
documents  or  without.  In  case  of  a  documentary  time  draft  the 
delivery  is  made  against  payment  or  acceptance,  usually  the 
latter.    Drafts  may  be  drawn  for  the  invoice  amount  alone  or: 

1.  For  the  invoice  plus  collection  charges. 

2.  For  the  invoice  plus  collection  expenses  and  interest 

charges. 

They  may  be  discounted,  pledged,  or  merely  placed  for 
collection.  They  may  be  drawn  "without  recourse"  but  this 
happens  very  rarely. 

The  importer,  if  his  credit  or  his  funds  permit,  may  secure 
credit  from  a  bank  abroad  by  means  of  a  letter  of  credit  which 
varies  in  its  terms  and  the  methods  of  sending  it.  Each  bank 
has  its  own  policy  regarding  these  letters  which  are  not  al- 
ways alike  and  frequently  vary  in  substance  as  well  as  in  form. 
The  importer  in  America  may  raise  the  money  to  pay  for  his 
purchases  abroad  by  the  following  means: 


FINANCING    FOREIGN    SHIPMENTS 


I.  Discounting  his  own  note. 


309 


2.  Discounting  his  customer's  paper,  if  he  is  well  known, 

with  his  indorsement. 

3.  Negotiating  a  loan  with  the   imported  merchandise 

placed  in  a  warehouse  as  collateral  and  delivered  in 
parts  against  a  trust  receipt. 

Both  importers  and  exporters  are  dependent  upon  banks 
in  their  operations.  The  selection  of  the  proper  bank  and  the 
making  of  advantageous  arrangements  with  it  are  therefore 
of  prime  importance  to  the  success  of  both. 


CHAPTER    XXXVIII 

FOREIGN  CREDITS  AND  COLLECTIONS 

Credit  Customs 

In  view  of  the  fact  that  long  credits  are  the  basis  of  suc- 
cessful foreign  trading,  it  would  seem  that  the  exporter  must 
be  prepared  to  do  business  on  a  credit  basis.  But,  as  indicated 
in  the  preceding  cliapter,  tlie  bank  is  generally  willing  for  a 
consideration  to  carry  the  burden  of  financing  the  transaction 
so  that  the  idea  of  long  foreign  credits  is  to  a  great  extent  a 
theory.  While  many  European  houses  give  as  long  as  12 
months'  credit  to  their  customers,  they  can  and  do  receive 
cash  as  soon  as  they  place  their  goods  on  board  the  steamer. 
The  exporter  surrenders  to  the  bank  the  bill  of  lading,  the 
bank  pays  him  the  face  figure  of  his  bill,  and  the  consignee 
pays  the  interest  on  the  money  to  the  bank,  instead  of  paying 
it  to  the  consignor.  From  this  point  the  transaction  is  be- 
tween the  bank  and  the  consignee.  Frequently  the  buyer  does 
not  settle  with  the  bank  for  years  if  he  needs  the  money  and 
his  credit  is  good,  the  bank  being  well  satisfied  with  the  in- 
terest; in  this  way  both  parties  profit. 

In  order  to  bring  about  such  an  agreement,  two  things  are 
necessary — the  customer's  financial  standing  must  be  satisfac- 
tory, and  the  bank  must  be  willing  to  discount  the  bill.  The 
export  bank  will  not  ordinarily  discount  an  exporter's  bill 
unless  it  knows  or  can  be  shown  that  the  buyer's  credit  stand- 
ing is  satisfactory.  One  justification  for  the  existence  of  the 
commission  man  is  that  he  knows  the  standing  of  his  custom- 
ers, he  is  willing  to  accept  their  credit,  and  he  knows  where 
to  find  a  bank  which  will  discount  his  customers'  bills. 

310 


FOREIGN    CREDITS    AND    COLLECTIONS  311 

Credit  Information 

British  and  other  European  banks  having  branch  houses 
in  different  parts  of  the  world  make  it  their  business  to  ac- 
cumulate exact  information  as  to  the  rating,  responsibility, 
character,  etc.,  of  local  merchants  as  do  the  branch  offices  of 
a  mercantile  agency  which  is  doing  international  business. 
The  most  reliable  report  is  that  which  is  obtained  from  an 
overseas  bank  and  by  personal  representatives  of  the  exporter. 
Bankers  are  very  careful  to  whom  they  give  credit  and  their 
information  is  being  constantly  brought  up  to  date,  for  they 
not  only  have  the  means  but  the  opportunities  to  check  and 
renew  it  at  frequent  intervals.  In  consequence  it  constitutes 
a  valuable  business  asset  and  foreign  bankers  are  usually  un- 
willing to  make  reports  as  to  credit  rating  to  any  but  their 
own  customers.  When  the  exporter's  bank  has  no  affiliation 
with  a  bank  in  the  part  of  the  world  to  which  the  goods  are 
to  be  shipped  it  may  be  unable  to  furnish  a  report,  in  which 
case  recourse  must  be  had  to  a  mercantile  agency.  Entire  re- 
liance should  not  be  placed  upon  information  received  from 
these  agencies.  They  are  not,  of  course,  infallible  and  their 
reports  should  be  corroborated  by  information  from  other 
sources  unless  the  financial  reputation  of  the  party  is  already 
fairly  well  known. 

If  an  exporter  wishes  to  ascertain  personally  the  standing 
of  his  customers,  the  usual  method  of  procedure  is  about  a^ 
follows. 

First,  he  should  find  out  from  the  records  of  the  concern, 
whenever  he  can,  whether  it  is  a  corporation,  what  is  its  capi- 
talization, and  who  are  the  directors.  In  most  countries  there 
are  commercial  courts  and  registration  bureaus  where  infor- 
mation pertaining  to  the  firm  must  be  filed  by  the  concern 
itself,  as  also  the  reports  of  some  of  Its  transactions. 

Second,  he  should  get  all  the  information  he  is  able  to 
obtain  from  the  concern  itself  in  as  tactful  a  manner  as  pos- 


312  THE  TECHNIQUE  OF  FOREIGN  TRADE 

sible — for  the  more  desirable  the  customer,  the  more  will  the 
latter  resent  the  distrust  implied  in  a  curt  request  for  credit 
information. 

The  third  step  is  to  go  to  some  of  the  parties  with  whom 
the  particular  concern  is  dealing  and  ascertain  from  them  and 
from  the  general  mercantile  public  what  they  think  of  the  firm. 

The  indispensable  information  will  include  the  age  of  the 
concern,  its  legal  status,  how  closely  it  is  supervised  by  the 
government,  its  history,  and  its  present  management  and  poH- 
cies.  Such  information  should  be  embodied  in  a  special  re- 
port, and  kept  on  file  so  that  such  changes  as  may  occur  from 
time  to  time  can  readily  be  made. 

Discounting  Drafts 

As  a  bank  is  primarily  an  institution  which  per- 
mits a  person  to  create  credits  either  by  deposit  of  funds  or 
by  borrowing  at  a  certain  rate  of  interest,  its  business  con- 
sists largely  in  providing  working  funds — for  a  consideration. 
This  consideration,  in  case  of  foreign  exchange,  is  the  dis- 
count which  the  banker  deducts  from  the  face  of  the  draft 
which  he  purchases  or  accepts.  This  discounting  is  a  separate 
business  transacted  on  a  large  scale  by  the  so-called  "bill  brok- 
ers." Their  function  is  to  discount  time  drafts  for  persons  who 
desire  to  realize  their  funds  immediately  and  who  are  willing 
to  pay  a  consideration  therefor. 

International  Banking 

In  nearly  every  South  American  country  there  are  strong 
European  banks  with  branches  everywhere.  Before  the  war 
there  were  in  Argentina  five  great  British  banks  with  a  total 
capitalization  of  about  $675,000,000,  and  several  German 
banks  with  branches  throughout  the  country  and  a  total  capi- 
talization of  $15,000,000.  Similar  conditions  prevailed  in 
Brazil,  Chile,  Peru,  and  other  South  and  Central  American 


FOREIGN     CREDITS    AND     COLLECTIONS  313 

countries.  Some  of  these  banks  had  agencies  in  New  York  and 
many  of  them  speciaHzed — some  in  South  American  business, 
others  in  far  eastern  credits,  some  in  coffee  credits,  others  in 
silk  or  dry  goods,  and  so  on. 

Since  the  passing  of  the  Federal  Bank  Act,  New  York  City 
has  been  coming  into  its  own  as  a  banking  center  of  the  world, 
and  a  bill  on  New  York  is  now  recognized  as  legitimate  and 
proper  in  overseas  transactions.  Formerly  the  financing  of 
imports  and  exports  was  confined  to  a  few  private  banks  which 
made  a  specialty  of  foreign  exchange.  At  present  a  bank  in 
any  large  city  of  our  country  is  hardly  considered  of  the  first 
importance  unless  it  is  engaged  in  foreign  transactions,  and 
there  is  scarcely  any  foreign  exchange  manager  who  is  not 
doing  some  sort  of  international  credit  business.  The  result 
of  this  change  is  the  development  of  the  foreign  commercial 
credit  business,  which  has  become  an  integral  part  of  our  bank- 
ing methods  and  which  is  growing  in  importance  every  year. 
This  development  is  the  most  auspicious  omen  of  a  thorough 
understanding  between  our  banking  interests  and  other  kinds 
of  business.  The  bankers  and  the  traders  are  coming  to  realize 
that  their  interests  in  the  extension  of  foreign  trade  are  iden- 
tical. 

Effect  of  Federal  Reserve  Act 

The  Federal  Reserve  Bank  Act  now  permits  the  national 
banks  of  the  United  States  to  accept  time  drafts  or  bills  of 
exchange  covering  international  transactions.  The  establish- 
ment of  an  open  discount  market  in  which  foreign  bills  may 
be  bought  and  sold  is  a  natural  sequence.  The  fact  that  ac- 
ceptances can  be  freely  sold  in  New  York  has  created  a  mar- 
ket in  the  different  parts  of  the  world  for  bills  on  New  York 
for  which  formerly  there  was  no  demand.  The  export  bank 
is  now  willing,  especially  during  a  crop-moving  season,  to 
carry  the  bill  for  the  voyage.     When  the  voyage  is  over  and 


314  THE  TECHNIQUE  OF  FOREIGN  TRADE 

the  draft  is  accepted  it  is  more  profitable  for  the  bank  to  dis- 
count the  acceptances  than  it  is  to  hold  them,  and  in  this  way 
it  secures  funds  for  reinvestment  in  other  bills  of  exchange. 
When  these  acceptances  are  indorsed  by  the  bank  they  do  not, 
in  their  buying  and  selling  power,  depend  upon  the  credit  of 
the  drawer  but  are  good  wherever  the  name  of  the  accepting 
bank  is  known.  (See  Appendix  A  for  sections  of  Federal  Re- 
serve Act  bearing  on  this  subject.) 

Trust  Receipts 

Not  infrequently  before  meeting  payment  on  his  import 
letter  of  credit  the  importer  is  allowed  by  his  own  bank  to 
receive  the  bill  of  lading  which  means  that  he  can  also  receive 
his  consignment  of  goods.  The  local  bank  thus  risks  both 
the  amount  of  the  credit  letter  and  the  value  of  the  goods,  but 
trusts  his  customer  to  settle  as  soon  as  he  sells  the  goods. 

This  kind  of  credit  is  extended  by  means  of  the  "trust  re- 
ceipt" which  the  importer  gives  to  his  banker  and  which 
contains  a  statement  that  the  merchandise  has  been  duly  re- 
ceived and  that  the  proceeds  from  its  sale  will  be  applied  first 
of  all  toward  paying  off  his  sight  draft  before  or  at  maturity. 
Such  receipts  usually  contain  reservations  to  the  effect  that  the 
merchandise  in  question  is  to  be  kept  separately  and  that  the 
proceeds  from  its  sale  will  be  kept  apart  and  be  distinct  from 
the  firm's  other  assets  and  that  they  are  to  be  delivered  to  the 
banker  on  the  day  they  are  received. 

On  the  receipt  of  the  money  from  its  client  the  local  bank 
may  send  it  to  the  bank  in  London  or  New  York  in  payment 
of  the  bill  which  the  bank  had  previously  accepted;  thus  the 
whole  amount  of  the  draft  is  covered  before  its  maturity. 

Finance  Bills 

"Finance  bills"  are  of  importance  in  the  banking  transac- 
tions between  the  United   States  and  England,   because  by 


FOREIGN    CREDITS    AND    COLLECTIONS  315 

means  of  these  bills  the  interest  rates  of  the  two  countries 
are  equalized.  When  a  banker  in  this  country  wishes  to  real- 
ize funds  here  for  the  time  being,  intending  to  meet  his 
draft  at  maturity  by  the  purchase  of  demand  sterling  or  cables, 
he  simply  draws  his  draft  upon  a  foreign  bank  and  sells  it  in 
the  discount  market.  It  is  a  method  by  which  a  banker  bor- 
rows in  a  cheap  market  and  lends  in  a  dear  one. 

Margraff  ("International  Exchange,"  page  14)  points  out 
the  following  advantages  to  a  bank  in  maintaining  a  foreign 
exchange  department: 

"i.  It  affords  complete  facilities  for  an  all  around  bank- 
ing business  thereby  preventing  the  possibility  of  losing  a 
profitable  account. 

"2.  It  is  a  valuable  auxiliary  to  attract  depositors. 

"3.  It  commands  added  prestige  among  bankers  in  its  own 
country  and  through  the  world,  who  accept  drafts  against  its 
letters  of  credit. 

"4.  The  bank  is  thereby  converted  into  an  international 
institution,  thus  vastly  increasing  its  field  of  operations,  by 
placing  it  in  touch  with  the  long  established  monetary  centers. 

"5.  The  bank  is  afforded  an  opportunity  of  placing  loans 
at  profitable  rates  of  interest  in  the  great  money  markets  of 
the  world  where  favorable  conditions  may  prevail,  by  the 
purchase  of  the  bills  of  exchange  as  an  investment. 

"6.  It  affords  the  bank  an  opportunity  to  borrow  funds  by 
means  of  finance  bills  in  any  money  market  of  the  globe." 


CHAPTER    XXXIX 

FOREIGN  COMMERCE  LAWS 

Necessity  for  an  Elementary  Knowledge 

By  the  laws  of  commerce  the  nations  of  the  earth  are 
brought  into  closer  comradeship  and  mutual  good-will.  These 
laws  not  only  safeguard  the  peoples  of  the  world  in  their  re- 
ciprocal relationships,  but  they  tend  to  develop  a  homogeneity 
of  interests  between  nations,  as  the  tendency  of  the  commer- 
cial laws  of  each  country  is  toward  uniformity  and  agreement 
with  those  of  other  countries.  Like  the  trade  of  the  world, 
the  laws  of  commerce  are  becoming  more  and  more  cosmopol- 
itan and  universal  in  their  character.  The  world  trader  of 
today  must,  then,  fit  himself  to  become  a  member  of  a  greater 
state  and  a  citizen  of  the  world. 

Trade  activities  in  foreign  lands  multiply  the  trader's  re- 
sponsibilities and  involve  the  question  of  the  responsibility  of 
others  to  him.  All  such  responsibilities  are  necessarily  regu- 
lated by  the  laws  of  the  countries  of  which  the  parties  are 
citizens  or  residents.  There  may  be  occurrences  involving  the 
laws  of  four  or  five  different  countries  simultaneously. 

It  follows,  therefore,  that  not  only  the  merchants  and  man- 
ufacturers but  the  student  preparing  himself  to  make  foreign 
trade  his  vocation  should  know  something  of  the  legal  require- 
ments as  related  to  commercial  activities  of  other  countries 
as  well  as  of  his  own.  He  must  know  their  fundamental  laws 
and  trade  usages.  Nowhere  on  earth  does  ignorance  of  the 
law  excuse  a  man's  acts  or  tolerate  his  illegal  commissions. 

The  trader  should  not,  however,  be  his  own  lawyer  and 
dispense  with  the  services  of  an  experienced  attorney.     The 

316 


FOREIGN    COMMERCE    LAWS  317 

question  arises,  where  is  he  to  look  for  such  services  in  the 
United  States?  If  we  are  to  become  world  traders  we  must 
eventually  develop  a  class  of  international  lawyers  who  are 
familiar  not  only  with  the  principles  involved  in  public  and 
private  international  law,  but  also  with  the  laws  of  commerce 
of  at  least  the  principal  countries  of  the  world.  At  present 
there  are  but  few  such  lawyers  in  this  country. 

The  Commercial  Codes 

The  Anglo-Saxon  system  of  law  is  divided  into  two  main 
classes:  the  civil  and  the  criminal.  Accordingly  those  states 
which  have  adopted  a  code  system  have  two  codes — a  civil 
and  a  criminal  code.  Under  these  codes  all  actions  at  law  are 
conducted  and  all  citizens  can  be  reached  no  matter  what  their 
vocation  or  standing.  But  this  procedure  holds  good  only  in 
the  Anglo-Saxon  countries. 

The  rest  of  the  civilized  world  in  addition  to  civil  and 
penal  law  has.  a  third  distinct  legal  entity,  viz. :  the  commerce 
law  embodied  in  a  special  code  called  the  commercial  code. 

Thus  a  man  abroad  who  wishes  to  sue  another  man  in  con- 
nection with  a  business  matter  must  do  so  under  the  commercial 
code  and  not  under  the  civil  code  as  in  the  United  States. 
The  commercial  code  is  administered  by  special  tribunals 
called  "commerce  courts."  These  courts  have  the  advantage 
over  other  courts  in  that  they  are  more  expeditious  and  more 
free  from  the  usual  technicalities,  resembling  in  this  respect 
our  municipal  or  justices'  courts. 

There  are  two  distinct  models — the  French  and  the  Ger- 
man— upon  which  the  commerce  laws  of  the  different  coun- 
tries of  the  world  are  based.  Their  thorough  organization 
dates  from  the  latter  part  of  the  last  century.  The  commerce 
laws  patterned  on  the  French  model  are  very  similar.  Thus, 
for  example,  the  commercial  codes  of  Honduras,  Guatemala, 
Paraguay,  Uruguay,  Cuba,  and  Argentina,  are  similar  and  in 


3i8  THE  TECHNIQUE  OF  FOREIGN  TRADE 

many  cases  identical,  because  they  are  substantially  the  same 
as  those  of  Spain  which  patterns  its  law  on  the  French  model. 
Those  of  Venezuela,  Peru,  Austria,  and  Japan  show  German 
influence.  Those  of  Sweden,  Norway,  and  Denmark  are  al- 
most identical  and  show  the  influence  of  both  standard  types. 

Registration 

Commerce  courts  in  every  country  have  a  registry  office 
which  resembles  our  registry  of  deeds.  This  registry  bureau  is 
a  very  important  factor  in  trade.  Here  every  individual  busi- 
ness man  and  every  corporation  or  firm  doing  business  within 
a  certain  area  is  compelled  by  law  to  register  and  in  some 
cases  to  file  periodical  reports  regarding  its  business  and  a 
sworn  statement  concerning  its  financial  status.  Non-com- 
pliance with  this  law  is  visited  with  severe  penalties.  Fre- 
quently business  men  are  directed  to  file  sworn  reports  as  to  the 
personnel  of  their  firm  and  as  to  any  changes  which  occur. 

In  most  countries  agents  must  have  power  of  attorney 
from  their  principals  with  the  exact  description  of  their  au- 
thority. Such  documents  are  also  filed  at  the  registry  bureau 
as  are  also  notices  of  changes  in  them.  Revocation  of  power 
of  attorney  must  always  be  recorded  lest  the  principal  be  held 
responsible  for  the  acts  of  the  agent,  although  the  latter  may 
no  longer  be  employed  by  him. 

The  registration  is  prescribed  to  take  place  usually  within 
15  days  from  the  commencement  of  business  or  from  the  revo- 
cation of  authority  or  other  change  which  the  law  requires 
to  be  recorded.  Specimen  signatures  of  the  heads  of  enterprises 
and  of  their  agents  must  oftentimes  be  registered  also. 

Foreign  corporations  have  greater  scope  of  action  in  coun- 
tries under  the  commerce  code,  and  greater  elasticity  in  their 
business  methods  is  allowed,  although  they  are  more  strictly 
supervised  by  the  government.  The  documents  which  they 
register  are  usually   the  certificate  of   incorporation,    which 


FOREIGN    COMMERCE    LAWS  319 

should  be  verified  by  the  embassy  or  the  consulate  of  the  coun- 
try where  it  is  to  be  filed,  the  minutes  of  the  first  meeting, 
proof  that  the  capital  required  by  law  has  been  paid,  proof  of 
publication  in  local  papers  of  notice  of  registration  and  of  the 
issuing  of  the  license  to  do  business,  which  is  usually  required 
in  the  permit. 

The  registration  meets  two  ends — it  protects  the  registrant 
and  it  protects  the  third  parties  by  giving  them  notice  of  the 
existing  status. 

In  America  a  man  who  buys  real  estate  and  fails  to  register 
his  deed,  or  who  buys  land  without  first  looking  up  its  rec- 
ord, would  be  considered  as  foolish  and  fully  deserving  of  the 
consequences  of  his  folly.  In  the  countries  under  the  commerce 
code  the  same  principle  is  extended  to  many  business  docu- 
ments and  if  a  man  is  foolish  enough  not  to  register  a  docu- 
ment when  he  is  required  to  do  so,  or  fails  to  look  up  a  record 
when  such  a  course  is  advisable,  he  is  liable  to  suffer  accord- 
ingly. 

Miscellaneous  Provisions 

In  all  cases  foreign  corporations  should  comply  with  every 
requirement  for  domestic  corporations.  The  same  is  true  of 
the  subsidiary  companies  organized  to  do  business  in  one  or 
more  foreign  countries.  There  are  in  many  cases  special  ad- 
vantages to  be  had  by  organizing  in  the  country  where  business 
is  to  be  conducted  and  it  is  always  advisable  to  consult  a  lawyer 
famihar  with  the  laws  of  that  country  before  the  details 
of  organization  are  decided  upon.  Frequently  American  com- 
panies have  been  refused  admittance  to  foreign  countries  on 
such  seemingly  trivial  grounds  as  that  their  home  charters  were 
perpetual  when  local  law  limited  the  life  of  a  corporation  to 
a  certain  period  of  years.  Most  countries  do  not  draw  a  sharp 
distinction  between  a  stock  corporation  and  copartnership. 

Notaries  have  great  power  in  code  countries.    They  usually 


y 


320  THE  TECHNIQUE  OF  FOREIGN  TRADE 

keep  in  their  files  or  on  their  record  books  the  originals  of 
deeds,  mortgages,  contracts,  and  copartnership  agreements  exe- 
cuted by  them,  issuing  certified  copies  only. 

Power  of  attorney  is  a  most  important  factor  in  transac- 
tions abroad,  since  it  takes  so  long  to  communicate  with  one's 
representative.  Great  care  should  be  exercised  in  giving  this 
power ;  preferably  it  should  be  granted  to  a  lawyer  or  a  banker 
of  high  standing. 

Married  women  in  Latin  America  and  in  other  countries 
under  commerce  codes  do  not  manage  their  own  property. 
As  it  passes  to  the  husband  the  moment  they  marry,  it  may  go 
into  his  business.  In  cases  of  bankruptcy,  creditors  in  many 
cases  are  subordinated  to  the  rights  of  the  wife  so  that  it  is 
sometimes  important  to  know  whether  or  not  a  customer  is 
married  and  if  so  if  he  is  doing  business  with  his  wife's  money. 

Bankruptcy  Laws 

Bankruptcy  laws  are  very  much  stricter  in  the  coun- 
tries where  commercial  codes  prevail  and  it  is  sometimes  dif- 
ficult if  not  impossible  for  the  bankrupt  to  secure  rehabilitation. 
In  a  number  of  countries  bankrupts  are  arrested  and  held  until 
released  by  creditors.  Extravagant  living,  selling  at  a  loss, 
taking  unnecessary  business  risks,  and  failure  to  keep  books 
prescribed  by  law,  make  bankruptcy  fraudulent  in  most  coun- 
tries and  prevent  the  rehabilitation  of  the  bankrupt. 

Foreign  creditors  of  the  bankrupt  debtor  are  generally 
treated  on  equal  terms  with  domestic  creditors.  All  licensed 
brokers  who  fail  in  their  business  are  deemed  by  law  and  are 
treated  as  fraudulent  bankrupts.  Their  powers  while  in  busi- 
ness are  closely  regulated  by  the  government. 

Compulsory  Bookkeeping 

The  countries  which  have  established  a  commercial  code 
as  a  rule  make  it  compulsory  for  all  who  are  engaged  in  busi- 


FOREIGN    COMMERCE    LAWS  321 

ness  to  keep  a  certain  number  of  books — in  some  countries  as 
many  as  eight.  But  that  is  not  all.  The  law  also  prescribes 
the  manner  and  method  of  keeping  the  books.  For  instance, 
the  pages  must  be  initialed  by  a  judge  of  the  commerce  court 
and  his  signature  must  appear  at  the  opening  and  the  closing 
of  all  books.  This  law  of  course  applies  to  the  branch  offices 
established  in  such  foreign  countries.  It  is  also  required  that 
copies  of  letters  and  telegrams  be  kept  on  file. 

The  books  usually  required  to  be  kept  under  the  code  are  a: 

1.  Journal 

2.  Ledger 

3.  Press  copy  letter  book 

These  books  must  be  preserved  for  a  period  of  from  10 
to  30  years.  In  case  this  law  is  not  complied  with  or  the  books 
are  lost  and  a  litigation  results,  a  judgment  is  rendered  on 
the  entries  in  the  books  of  the  adverse  parties. 

General  Governmental  Supervision 

As  the  usual  thing,  business  in  all  foreign  countries  gov- 
erned by  a  commercial  code  is  more  closely  supervised  by  the 
government  than  is  the  case  in  the  United  States.  For  that 
reason  the  creditors  are  better  protected  from  fraud  and  impo- 
sition than  in  our  home  markets.  As  a  general  rule  it  is  safe 
enough  to  deal  abroad  on  credit  with  a  well-established  and 
reputable  concern,  and  if  it  were  not  for  the  distance  separating 
a  foreign  customer  from  the  seller  in  the  United  States  there 
would  seem  to  be  no  reason  why  the  foreigner  should  not  be 
at  least  as  worthy  of  credit  as  our  domestic  customers  of  the 
same  standing. 

A  foreigner  who  lives  under  a  commerce  code  is  far  more 
severely  dealt  with  by  law  than  he  would  be  in  the  United 
States  in  case  of  his  inability  to  meet  his  commercial  obliga- 
tions.    Foreign  creditors  are  almost  invariably  treated  justly 


322  THE  TECHNIQUE  OF  FOREIGN  TRADE 

by  the  commerce  courts  and  in  a  number  of  countries — Russia 
and  Turkey,  for  example — they  have  had  a  preference  over 
the  domestic  creditors. 

Commercial  Paper 

Commercial  paper  in  nearly  every  country  of  the  world 
is  governed  very  much  by  the  same  general  law  which  exists 
in  the  Anglo-Saxon  countries.  There  are  of  course  minor  dif- 
ferences here  and  there  and  these  must  be  carefully  observed. 
Protest  is  necessary  in  nearly  every  country  and  days  of  grace 
are  usually  allowed.  Actions  under  a  commerce  code  are 
barred  by  a  limitation  in  a  very  much  shorter  time  than  is  the 
case  in  the  United  States  or  Great  Britain,  and  very  often  a 
suit  must  be  brought  within  a  period  of  3  months  if  recourse 
to  law  is  to  be  had. 

As  a  general  rule,  commercial  paper  should  be  presented 
without  delay  on  the  day  it  is  due  and  some  countries  provide 
that  tmless  a  check  is  presented  within  a  period  of  from  5 
days  to  3  weeks,  the  claim  may  be  declared  void  and  no  legal 
responsibility  can  be  attached  thereto. 

Other  countries  have  a  provision  of  law  as  to  what  con- 
stitutes a  complete  indorsement  of  a  bill  of  exchange.  This 
document  generally  should  contain  the  date  on  which  it  is 
made,  the  name  of  the  party  to  whom  it  is  transferred,  the 
declaration  of  value  received,  and  the  signature  of  the  in- 
dorsee 

In  France  bills  payable  at  sight  should  be  presented  within 
3  months  from  their  date  and  are  barred  by  limitations  after 
5  years.  Checks  must  be  presented  for  payment  within  from 
5  to  12  days,  and  sight  drafts  within  4  days  from  date  of 
protest. 

In  Peru  a  commercial  paper  with  blank  spaces  or  altera- 
tions can  be  declared  void  and  the  indorsements  should  be  dated 
and  state  the  value  received.  The  same  rule  obtains  in  Ecuador. 


FOREIGN    COMMERCE    LAWS  323 

In  Argentina  and  Chile  a  bill  of  exchange  must  be  pre- 
sented for  payment  on  the  date  due  and  in  case  of  refusal  must 
be  protested  without  delay ;  otherwise  the  holder  will  be  liable 
for  damages.  The  notice  of  protest  must  be  sent  to  all  in- 
dorsers,  usually  within  1 5  days. 

In  Japan  actions  on  commercial  paper  are  barred  by  limita- 
tion after  6  months. 

In  Turkey  after  a  bill  is  protested  for  non-payment  the 
bearer  may  proceed  to  attach  the  property  of  the  drawee  or 
any  of  the  indorsers. 

Peculiar  Trade  Customs 

Each  country  has  its  own  peculiar  trade  usages  and  cus- 
toms which  enter  into  its  legal  fabric  and  are  generally  en- 
forced as  if  they  were  the  law  of  the  land. 

In  some  parts  of  the  world  these  customs  are  most  unu- 
sual. China,  for  instance,  has  no  stable  commercial  law  and  its 
general  legal  edifice  rests  largely  upon  ancient  customs,  which 
differ  in  each  province.  The  keynote  of  the  entire  Chinese 
legal  system  is  the  doctrine  of  mutual  responsibility.  This  is 
to  say,  that  those  related  to  or  closely  connected  with  a  guilty 
person  are  held  responsible  for  his  acts  on  the  theory  that  they 
should  have  seen  to  it  that  he  behaved  himself.  Such  persons 
oftentimes  have  been  punished  severely  for  the  acts  of  relative 
or  friend,  whether  these  acts  were  of  a  criminal  or  business 
nature,  on  the  ground  of  dereliction  of  duty  in  not  exerting 
strong  enough  moral  influence  over  the  wrong-doer. 

In  Japan  foreign  business  is  largely  in  the  hands  of  im- 
porters who  are  reached  through  a  native  salesman  who  acts 
as  an  intermediary  between  buyer  and  seller.  It  is  always 
safer  in  dealing  with  this  salesman  to  stipulate  that  his  author- 
ity is  transferable  or  can  be  terminated  at  the  will  of  the  prin- 
cipal— otherwise,  if  working  on  salary  as  well  as  commission, 
he  often  claims  that  he  was  engaged  for  a  year  or  more. 


324  THE  TECHNIQUE  OF  FOREIGN  TRADE 

Commercial  Travelers 

Many  if  not  most  of  the  countries  of  the  world  have  strict 
regulations  concerning  commercial  travelers.  Such  travelers 
are  generally  required  to  take  out  a  license  and  pay  a  tax  before 
they  can  do  business,  some  countries  going  so  far  as  to  demand 
a  certificate  of  identification  from  the  firm  with  a  photograph 
of  the  traveler  duly  certified  to  by  the  consul.  In  most  Latin- 
American  countries  a  license  and  trade  tax  are  required  from 
all  persons  engaged  in  business. 

To  equalize  taxation  between  domestic  and  foreign  busi- 
ness a  tax  is  levied  on  all  foreign  travelers.  Such  taxes  can 
usually  be  escaped  in  Latin  America  by  the  traveler  associat- 
ing himself  temporarily  with  a  local  concern  and  acting 
as  its  agent.  Also  in  these  countries  commercial  travelers 
should  carry  power  of  attorney  from  their  principals  and  in 
some  cases  they  are  required  to  have  health  certificates.  In- 
variably it  is  good  policy  to  carry  passports  in  order  to  avoid 
legal  entanglements. 

The  regulations  in  force  in  the  various  countries  are  given 
in  Chapters  XLI  and  XLII. 

Law  of  Agency 

The  main  principles  of  the  law  of  agency  are  very  similar 
in  all  civilized  countries.  In  China,  Turkey,  Egypt,  and  some 
other  oriental  countries  there  have  been  established  by  treaty, 
federal  courts  and  mixed  tribunals  where  action  between  na- 
tives and  foreigners  are  tried.  These  courts  and  tribunals  are 
composed  of  judges  of  the  foreign  countries  which  are  the 
parties  to  the  treaty.  In  all  the  semicivilized  countries  and  in 
nearly  all  of  the  Orient  there  are  consular  courts  in  which  the 
minor  differences  between  the  subjects  of  each  particular 
country  represented  by  the  consulate  are  tried. 

Sometimes  stoppage  in  transitu  of  the  goods  for  a  foreign 
country  becomes  necessary.    It  was  held  that  in  such  cases  the 


FOREIGN    COMMERCE    LAWS  325 

stoppage  does  not  rescind  the  contract  of  sale,  merely  suspend- 
ing the  delivery,  and  that  the  seller  has  the  right  of  stoppage. 

It  has  been  held  that  goods  sold  F.  O.  B.  or  C.  I.  F.  are 
the  property  of  the  buyer  and  are  at  his  risk  the  moment  they 
are  put  on  board  the  ship.  Under  C.  I.  F.  contract  of  sale  the 
vender,  however,  is  in  duty  bound  to  ship  the  goods  under  such 
bill  of  lading  as  will  insure  their  delivery  at  the  port  of  des- 
tination. It  has  also  been  decided  that  the  principle  governing 
recovery  of  damages  Is  not  applicable  to  conveyance  by  sea. 
These  decisions,  which  have  been  generally  followed  by  the 
United  States  courts,  have  been  secured  under  the  so-called 
Harter  Act,  which  differs  from  the  English  law  in  that  it  pro- 
hibits the  insertion  of  negligence  clauses  by  which  the  ocean 
carrier  is  relieved  from  liability  in  "loading,  stowage,  custody, 
care,  and  proper  delivery  and  seaworthiness." 

Sources  of  Information 

There  is  no  one  source  of  complete  information  on  the 
subject  of  commercial  laws  of  all  the  countries  of  the  world. 
The  year-books  of  different  countries  usually  give  a  fair  out- 
line of  the  commercial  laws  of  the  countries  which  publish 
them.    Few  of  them  have  been  translated  into  English. 

There  are  very  few  lawyers  in  the  United  States  today 
who  are  familiar  with  the  commercial  laws  of  foreign  coun- 
tries and  these  few  specialize  in  the  laws  of  but  one  or  two 
countries.  For  practical  purposes  in  intricate  legal  matters  it  is 
best  to  employ  a  local  attorney  of  the  particular  country. 

In  matters  where  legal  information  is  desired  immediately, 
the  aid  of  the  Bureau  of  Foreign  and  Domestic  Commerce  of 
the  United  States,  or  of  the  Pan-American  Union  regarding 
the  laws  of  Latin  America  should  be  sought. 

In  some  cases  the  consulate  of  the  country  involved  or  even 
the  embassy  may  be  willing  to  render  assistance,  but  these 
offices  usually  refer  such  inquiries  to  their  lawyers. 


CHAPTER    XL 

SUMMARY  OF  TRADE-MARK,  PATENT,  AND 

TARIFF  LAWS 

A  Knowledge  of  Trade-Mark  Laws  Essential  in  Foreign  Trade 

The  protection  against  the  use  by  others  of  the  manufac- 
turer's trade-mark  is  perhaps  more  important  abroad  than  at 
home.  There  the  customer  may  not  be  famihar  with  the  lan- 
guage of  the  country  to  which  the  trader  belongs  and  he  rec- 
ognizes the  goods  largely  by  the  brand  or  trade-mark  which 
they  bear. 

In  order  to  hold  trade  in  foreign  lands  it  is  of  great  im- 
portance to  be  in  a  position  legally  to  prevent  competitors  from 
using  the  trade-mark  by  which  a  particular  owner's  goods  are 
known.  Its  appropriation  or  even  imitation  results  in  injury 
to  the  trade  of  the  manufacturer  of  the  genuine  article  and 
this  injury  may  be  twofold.  He  is  not  only  deprived  of  the 
use  of  a  mark  which  he  established  through  his  effort  but 
oftentimes  it  is  made  impossible  for  him  to  send  his  goods 
to  the  market  in  which  his  trade-mark  has  been  usurped  since 
the  reputation  of  his  goods  mav  there  have  been  discredited 
by  the  sale  of  imitations  under  the  name  by  which  the  genuine 
article  is  known.  Such  imitations  are  invariably  of  inferior 
quality  in  order  that  they  may  be  sold  at  a  lower  price. 

Classes  of  Trade-Mark  Laws 

Trade-mark  laws  of  foreign  countries  may  be  divided  into 
two  classes:  first,  those  under  which  the  right  of  ownership  is 
acquired  by  adoption  and  use  and  the  registration  is  secondary, 
as  in  the  United  States;  second,  those  under  which  the  right  of 

326 


TRADE-MARK,   PATENT,   AND   TARIFF  LAWS  327 

ownership  is  derived  exclusively  from  registration,  irrespective 
of  whether  or  not  the  trade-mark  has  been  in  actual  use  prior 
to  registration. 

By  far  the  greatest  number  of  foreign  trade-mark  laws 
belong  to  the  second  class,  which  means  that  the  ownership  of 
the  trade-mark  begins  with  its  registration  and  exists  so  long 
as  the  registration  is  in  force.  In  many  countries,  especially 
in  South  America,  its  absolute  ownership  is  given  by  law  to 
the  person  who  first  files  an  application  for  registry,  whether 
he  is  the  owner  of  the  trade-mark  in  question  or  not.  It  then 
becomes  possible  for  the  infringer  to  secure  legal  rights  and  to 
sue  the  original  owner  as  an  infringer  to  prevent  the  selling 
of  his  goods  in  the  countries  where  the  owner  failed  to  register 
his  trade-mark. 

Where  such  laws  prevail,  the  original  user  of  the  trade- 
mark is  without  a  remedy  at  law  should  someone  else  first 
register  it.  and  the  only  way  for  him  to  protect  himself  against 
usurpation,  which  is  but  too  common  in  many  countries,  is  to 
have  the  trade-mark  registered  as  promptly  after  its  adoption 
as  possible,  especially  in  those  countries  where  trade  is  con- 
templated. 

Regulations  of  the  International  Convention 

In  considering  foreign  trade-mark  laws,  one  must  always 
inquire  whether  or  not  the  country  under  consideration  is  a 
party  to  the  International  Convention;  if  it  is  a  party,  its  laws 
on  the  subject  of  trade-marks  should  be  considered  in  connec- 
tion with  the  provisions  of  the  convention  to  which  each  sig- 
natory country  is  subject.  The  rules  of  the  convention  are  as 
follows: 

The  International  Convention  provides  that  each  of  the 
countries  party  to  the  convention  shall  register  and  protect  the 
trade-marks  of  citizens  and  residents  of  each  of  the  countries 
which  are  parties  to  the  same  to  the  extent  that  domestic  trade- 


328  THE  TECHNIQUE  OF  FOREIGN  TRADE 

marks  are  protected.  It  further  provides  that  each  country 
which  is  a  party  to  the  convention  shall  register  the  trade-marks 
of  citizens  or  residents  of  the  other  countries  in  the  form  in 
which  they  are  registered  in  the  country  of  their  origin.  It  also 
provides  that  application  for  registration  made  in  any  of  the 
countries  within  four  months  from  the  date  of  application  for 
registration  in  the  country  of  origin  shall  be  given  the  same 
effect  as  if  made  simultaneously  with  the  application  in  the 
country  of  origin. 

The  following  countries  are  now  parties  to  the  Interna- 
tional Convention: 


Belgium 

Netherlands  with  Dutch  In- 

Brazil 

dies 

Denmark 

Norway 

Dominican  Republic 

Portugal 

France  and  her  Colonies 

Serbia 

Great  Britain,  including  Can- 

Spain 

ada,     New     Zealand,     and 

Sweden 

Queensland 

Switzerland 

Italy 

Tunis 

Japan 

United  States 

Registration 

Registration  fees  are  frequently  insignificant ;  in  some 
countries  they  do  not  exceed  $5,  and  in  only  a  few  of  the  coun- 
tries of  the  world  do  the  charges  exceed  those  existing  in  the 
United  States. 

The  requirements  of  registration  are  generally  few  and 
simple.  Usually  all  that  is  required  is  the  statement  in  the 
language  of  the  country  in  which  registration  is  desired  de- 
scribing the  identity  of  the  applicant,  with  a  few  printed  copies 
of  the  trade-mark  and  a  statement  as  to  the  class  of  goods  on 
which  the  trade-mark  is  to  be  used,  the  power  of  attorney,  pro- 
vided the  applicant  does  not  appear  in  person,  and  of  course  the 
fee. 


TRADE-MARK,   PATENT,   AND    TARIFF   LAWS  329 

Usually  the  term  for  which  registration  is  granted  is  short 
— 10  to  20  years — but  renewal  is  possible  in  every  case.  If 
the  trade-mark  is  not  used  in  the  country  where  it  is  registered 
it  will,  after  a  certain  period  of  time,  be  considered  abandoned. 

Formalities  of  registration  in  Latin-American  countries 
may  be  obtained  from  Tariff  Series  No.  31  of  the  Department 
of  Commerce. 

The  definition  of  what  may  be  registered  as  a  trade-mark 
is  generally  broad  enough  to  include  any  distinguishing  mark. 

What  May  Not  be  Registered 

Most  of  the  countries  of  the  world  do  not  permit  the  regis- 
tration of  trade-marks  which  contain  one  of  the  following: 

1.  Letters,  words,  coats-of-arms,  or  armorial  bearings  of 

royalty,  and  public  or  official  insignia  used  or  that 
may  be  used  by  the  state. 

2.  If  exclusively  composed  of  portraits  of  the  king  or 

emperor  or  of  the  members  of  the  royal  house. 

3.  Scandalous  matter  or  representations  contrary  to  good 

morals. 

4.  Marks  previously  registered  or  which  so  closely  re- 

semble the  previously  registered  marks  as  to  cause 
confusion  or  tend  to  deceive. 

5.  Marks  composed  exclusively  of  numerals,  letters,  or 

words. 

6.  Form,  color,  and  terms  usually  employed  to  indicate 

the  nature  of  the  goods  or  the  class  to  which  they 
belong,  or  which  do  not  constitute  distinctive  marks. 

7.  Portraits  of  living  persons  if  used  without  their  con- 

sent. 

Rules  Regarding  Registration 

In  foreign  countries  the  protection  against  infringement  of 
registered  trade-marks  is  better  than  in  this  country.  As  a  rule, 


330  THE  TECHNIQUE  OF  FOREIGN  TRADE 

provision  is  made  for  criminal  as  well  as  civil  punishment  for 
wilful  infringement  of  duly  registered  trade-marks.  Such 
remedy  is  provided  in  addition  to  the  right  on  the  part  of  the 
legal  owner  of  a  registered  trade-mark  to  recover  damages  for 
past  infringement.  It  is  also  possible  to  obtain  an  injunction 
against  future  infringement. 

Nearly  all  foreign  countries  recognize  the  distinction  be- 
tween commercial  names  and  trade-marks,  and  in  practically 
every  country  of  the  world  commercial  names  will  be  protected 
without  registration. 

It  must  be  noted  that  in  many  foreign  countries  imported 
goods  must  be  marked  with  the  name  of  the  country  in  which 
they  are  manufactured  and  false  marking  in  this  respect  is 
usually  punishable. 

In  a  number  of  Latin-American  countries,  distinction  is 
made  between  the  manufacturer's  mark  used  to  designate  the 
products  of  a  particular  factory  or  concern,  and  the  dealer's 
mark  used  to  distinguish  the  articles  handled  by  a  particular 
dealer. 

The  appointment  of  an  attorney  is  usually  necessary  to 
register  trade-marks  unless  the  applicant  appears  in  person. 
Some  countries  require  the  power  of  attorney  and  the  certifi- 
cate of  previous  registration  in  the  country  of  origin,  and  both 
must  be  legalized  or  authenticated  by  the  consul  in  the  country 
where  the  mark  is  to  be  registered. 

Applications  usually  must  be  in  duplicate  form,  and  in  some 
countries  like  Cuba  and  Argentina,  from  6  to  15  copies  are 
required.  In  Latin-American  countries  the  application  must 
be  made  on  stamped  paper.  As  a  rule  it  should  contain  a 
description  of  the  mark  in  the  language  of  the  country,  the 
name  and  address  of  the  applicant  and  of  the  factory,  a  de- 
scription of  the  kind  of  industry,  etc.  It  is  generally  required 
that  a  certain  sized  electrotype  of  the  mark  be  presented  with 
the  application.    Some  countries  require  that  the  size  and  color 


TRADE-MARK,    PATENT,   AND    TARIFF   LAWS  331 

of  the  mark  be  indicated,  and  a  number  of  countries  that  the 
application  be  published  before  registration  may  be  effected. 
It  is  generally  provided  that  if  the  application  should  be  re- 
jected, the  fee  is  to  be  returned. 

Patent  Laws 

Delay  in  applying  for  patent  protection  may  result  in  the 
loss  of  right  to  a  patent  even  though  the  delay  in  applying  for 
the  patent  has  been  very  short.  It  is  the  general  rule  that  an 
invention  which  has  become  generally  known  for  a  period  of 
time  cannot  obtain  patent  in  any  country.  Patents  are  granted 
usually  in  all  countries  only  for  new  inventions.  Hence,  a 
manufacturer  desirous  of  obtaining  a  monopoly  on  his  patent- 
able product  should  apply  for  a  patent  at  once  in  those  coun- 
tries where  there  is  likelihood  that  the  product  may  be  manu- 
factured. 

In  more  than  seventy  countries  a  patent  may  be  applied  for, 
but  as  there  is  so  little  manufacturing  carried  on  in  many  of 
them  the  danger  of  infringement  is  not  large  enough  to  justify 
the  expense.  It  is  usually  advisable,  however,  to  apply  for  a 
patent  in  about  ten  or  twelve  countries,  because  otherwise  the 
expense  of  maintaining  a  patent  would  in  many  cases  be  pro- 
hibitive. 

The  International  Convention  regulations  referred  to  in  the 
discussion  of  trade-marks  also  contain  important  provisions 
concerning  patents.  These  provisions  protect  the  applicant  for 
a  patent  in  all  of  the  countries  which  are  parties  to  the  con- 
vention to  the  extent  that  he  is  accorded  priority.  Accordingly, 
the  applications  subsequently  made  in  any  of  the  other  coun- 
tries are  given  the  same  effect  as  if  filed  on  the  date  of  the 
application  made  in  the  country  of  the  origin,  provided  that 
such  subsequent  applications  are  filed  within  a  certain  period 
of  time. 

The  applicant  under  the  provisions  of  the  convention  is  free 


332  THE  TECHNIQUE  OF  FOREIGN  TRADE 

to  make  public  use  of  this  invention  during  the  period  between 
the  date  of  appHcation  in  the  country  of  origin  and  the  fihng 
of  the  subsequent  applications  in  other  countries. 

The  articles  of  the  convention  also  provide  that  importation 
of  goods  embodying  the  invention  into  any  country  shall  not 
invalidate  the  patent,  provided  the  requirements  of  that  coun- 
try regarding  the  vi^orking  of  the  patent  are  fulfilled. 

Tariff  Laws 

Every  tariff  act  usually  has  an  introductory  chapter  vv^herein 
are  enumerated  articles  which  are  admitted  duty-free  (if  there 
be  any  such  articles)  also  the  articles  which  are  denied  admis- 
sion, such  as  salt  in  some  countries,  ammunition  and  absinth  in 
other  countries,  and  so  on. 

The  tariffs  are  usually  classified  and  the  articles  taxed  are 
arranged  systematically  according  to  various  schedules.  This 
is  where  the  trouble  generally  arises  between  the  importer  and 
the  custom  house  officials.  The  importer  oftentimes  claims 
that  his  importations  should  be  classed  under  a  different  sched- 
ule or  classification  from  that  under  which  the  customs  offi- 
cials claim  it  belongs.  It  may  mean  a  great  deal  to  him  in 
the  amount  of  duty  to  be  paid.  Such  differences  give  rise  to 
litigation  in  which  oftentimes  large  amounts  of  money  are 
involved. 

Some  countries  tax  imports  at  so  much  per  unit,  other 
countries  levy  taxes  ad  valorem,  but  usually  a  certain  per  cent 
on  net  or  gross  weight  is  charged.  Therefore  it  is  usually  nec- 
essary that  legal  and  gross  weight  be  stated  upon  the  package 
to  be  exported. 

There  are  general  and  conventional  tariffs ;  the  former  is 
levied  in  all  cases,  the  latter  only  according  to  the  agreement 
between  different  nations. 

It  is  within  the  province  of  the  act  prescribing  tariff  to 
set  forth  also  the  custom  house  machinery  explaining  the  func- 


TRADE-MARK,    PATENT,   AND    TARIFF   LAWS  333 

tions  and  duties  of  various  officials  charged  with  the  adminis- 
tration of  customs,  and  the  procedure  regarding  the  entry  of 
goods  from  foreign  countries. 
Tariff  is  levied: 

1.  For  revenue. 

2.  To  safeguard  and  protect  home  markets. 

3.  To  extend  foreign  trade  by  being  in  a  position  to  nego- 

tiate better  terms  of  entry. 

4.  For  political  purposes. 

5.  To  solve  the  problem  of  colonial  markets. 

It  is  not  necessary  to  go  into  the  differences  of  opinion  that 
everywhere  exist  relative  to  the  wisdom  of  high  or  low  tar- 
iffs. The  exporter  should,  however,  familiarize  himself  with 
the  tariff  acts  of  countries  in  which  he  is  interested.  For  that 
purpose  some  of  the  publications  treating  of  this  subject  or  the 
Department  of  Commerce  publications  may  be  consulted. 

The  laws  in  foreign  countries  change  as  they  do  in  Amer- 
ica and  it  is  impossible  to  quote  laws  specifically  even  if  space 
permitted. 


PART   V 
TRADE   REGULATIONS 


CHAPTER   XLI 

COMMERCIAL  TRAVELERS 

Knowledge  of  Regulations  Indispensable  to  the  Exporter 

As  has  been  previously  stated,  nearly  every  country  has 
some  regulations  pertaining  to  commercial  travelers.  It  is  im- 
portant that  the  exporter  know  these  regulations,  not  only  that 
he  may  figure  accurately  the  expense  of  conducting  a  selling 
campaign  in  any  given  territory,  but  also  that  he  may  provide 
his  representative  with  the  necessary  documents  and  facilities 
for  carrying  out  that  campaign  successfully. 

As  an  aid  in  obtaining  this  knowledge,  the  digest  of  the 
regulations  pertaining  to  commercial  travelers  in  every  coun- 
try of  the  world,  which  appears  later  in  this  chapter,  has  been 
compiled  from  the  most  reliable  sources  available.  It  may 
serve  a  very  useful  purpose  in  giving  the  exporter  an  idea  of 
the  cost  and  the  formalities  which  will  be  involved  in  conduct- 
ing his  proposed  foreign  campaign,  both  of  which  factors  he 
may  wish  to  consider  beforehand. 

The  fees,  laws,  and  even  railroad  regulations  pertaining 
to  commercial  travelers  in  foreign  countries  change  fre- 
quently. Notwithstanding  this  circumstance,  the  changes  are 
never  radical  and  there  is  always  a  very  great  similarity  be- 
tween the  old  and  the  new  regulations ;  the  substance  usually 
remains  unchanged.  In  view  of  this  fact,  the  exporter  will  get 
from  the  digest  a  pretty  good  and  certain  idea  as  to  what 
the  requirements  in  a  given  country  are,  so  that  he  may  esti- 
mate the  probable  cost  and  know  formalities  to  be  undergone 
with  fair  approximation  even  though  he  be  unable  to  learn 
the  current  rates  and  regulations  from  other  sources.     The 

337 


338  TRADE    REGULATIONS 

digest  has  been  made  as  brief  as  possible  so  that  the  exporter 
may  obtain  the  desired  information  at  a  glance.  Further  de- 
tails or  changes  which  occur  may  usually  Ije  ol^tained  from  the 
Bureau  of  Foreign  and  Domestic  Commerce,  Washington, 
D.  C,  or  the  general  consulate  in  New  York  of  the  country 
under  consideration. 

License  Fees  and  Taxes 

An  examination  of  these  laws  will  show  that  in  some 
countries  the  license  fees  charged  and  the  taxes  levied  on  trav- 
elers are  quite  large.  In  some  countries,  moreover,  such  taxes 
are  imposed  by  both  federal  and  municipal  governments,  while 
an  additional  province  tax  is  not  exceptional.  It  is  true  that 
in  most  South  American  countries  these  taxes  can  be  avoided 
by  the  foreign  traveler  if  he  makes  arrangements  to  act  also 
as  the  representative  of  a  local  concern,  but  this  is  not  pos- 
sible in  every  case.  It  should  be  noted  further  that  in  many 
countries  an  income  tax  is  levied  in  addition  to  the  license 
tax,  and  also  that  the  license  tax  is  usually  personal,  not  trans- 
ferable, and  is  higher  if  the  traveler  represents  more  than  one 
firm. 

Recent  Treaties  with  South  American  Countries 

A  distinct  tendency  toward  a  simplification  of  the  now 
complicated  regulations  existing  in  the  countries  of  South 
America  is  indicated  by  the  treaties  recently  concluded  be- 
tween the  United  States  and  Uruguay  and  between  the  United 
States  and  Guatemala.  The  chief  feature  of  these  treaties  is 
that  they  provide  for  substitution  of  a  single  license  fee  in 
place  of  the  numerous  local  taxes  and  fees  previously  collected 
from  commercial  travelers  in  most  of  the  South  American 
countries.  By  this  provision,  and  by  others  of  less  importance, 
the  operations  of  United  States  travelers  in  the  countries  men- 
tioned are  greatly  facilitated. 


COMMERCIAL    TRAVELERS  339 

The  strength  of  this  tendency  to  promote  foreign  trade 
through  the  simpHfication  of  regulations  is  borne  out  by  the 
fact  that  negotiations  are  understood  to  be  in  progress  for 
the  conchision  of  similar  treaties  with  more  than  half  the 
countries  comprising  the  Pan  American  Union.  These  nego- 
tiations seem  to  be  received  with  particular  favor  by  agencies 
influential  in  the  foreign  trade  affairs  of  Argentina,  one  of 
the  largest  of  our  South  American  neighbors. 

Documents  Required 

Many  countries  reciuire  of  commercial  travelers  in  addition 
to  a  license  and  a  tax  payment,  documents  of  identity  and 
power  of  attorney  from  their  principal  showing  authority  to 
act  and  proving  that  they  represent  a  certain  firm.  In  cases 
where  countries  do  not  by  law  require  such  documents,  it  is 
invariably  advisable  to  carry  them,  for  one  can  never  know 
when  a  need  for  them  may  arise.  In  addition  to  the  power 
of  attorney,  British  and  other  foreign  travelers  frequently 
carry  certificates  and  letters  of  introduction  from  chambers  of 
commerce,  boards  of  trade,  banks,  and  merchants  whose  stand- 
ing and  reputation  are  well  known  to  the  country  which  they 
propose  to  visit. 

Admission  and  Sale  of  Samples 

The  laws  pertaining  to  the  admission  of  samples  without 
any  commercial  value  are  practically  uniform,  in  that  such 
articles  are  admitted  free  of  charge,  whereas  samples  of  com- 
mercial value  are  usually  admitted  upon  deposit  of  security, 
which  is  refunded  if  the  goods  are  taken  out  of  the  country 
within  some  specific  period.  If  the  refund  is  desired,  the  sam- 
ples must  be  sent  back  from  the  same  port  through  which  they 
originally  entered.  It  is  the  custom  in  a  great  many  countries, 
however,  for  commercial  travelers  to  sell  their  samples  before 
they  leave  the  territory. 


340  TRADE    REGULATIONS 

It  will  be  noted  also  that  there  is  a  different  regulation  for 
travelers  who  propose  actually  to  sell  goods  instead  of  merely 
to  take  orders.  Some  countries  or  states  within  countries  in 
which  there  is  no  tax  upon  travelers  taking  orders,  require  a 
pedler's  tax  in  case  they  make  actual  sales.  Moreover,  most 
of  those  states  in  which  there  is  an  ordinary  tax  for  travelers 
require  an  additional  license  if  samples  are  to  be  sold. 

Other  Important  Factors 

Generally  speaking,  no  tax  is  levied  on  printed  matter.  In 
most  of  the  Latin-American  countries  such  a  tax  exists,  but 
is  seldom  enforced. 

Railroads  abroad  generally  do  not  give  commercial  trav- 
elers preferential  treatment.  The  railroads  in  some  countries, 
however,  are  an  exception  to  this  rule  and  grant  a  consider- 
able reduction,  as  will  be  noted  in  the  digest  of  regulations. 
Furthermore,  in  certain  countries  railroads  make  a  reduction 
in  rates  for  carrying  the  sample  trunks  of  commercial  travelers. 
In  some  cases  this  reduction  is  large  and  it  will  be  found  worth 
while  to  secure  definite  information  on  the  subject  before  mak- 
ing plans  for  a  selling  campaign  in  a  particular  territory. 

The  exporter  must  bear  in  mind  that  the  season  during 
which  a  campaign  is  conducted  is  of  great  importance.  He 
should  send  his  traveler  into  a  country  during  the  season  which 
is  likely  to  afford  the  best  climatic  conditions  for  a  selling 
campaign,  and  should  bear  in  mind  the  fact  that  in  most  foreign 
countries  business  is  much  more  brisk  at  certain  times  of  the 
year  than  at  others  and  that  certain  seasons  exist  there  as 
in  the  United  States  for  the  sale  of  certain  classes  of  goods. 

New  Republics  and  Enemy  Countries 

No  regulations  are  given  of  the  various  new  republics 
which  have  come  into  being  as  a  result  of  the  war  because  at 
this  time  it  is  not  known  what  the  regulations  will  be.     It  is 


COMMERCIAL    TRAVELERS  341 

safe  to  assume,  however,  that  duruig  the  reconstruction  period 
travelers  will  generally  be  admitted  free,  especially  representa- 
tives of  those  firms  which  deal  in  articles  greatly  in  demand. 
The  firm  sending  a  traveler  to  any  of  these  countries  should  get 
in  touch  with  the  Department  of  Commerce  regarding  the 
regulations.  If  no  information  can  there  be  obtained,  he 
should  cable  directly  to  the  American  consulate  in  the  coun- 
try with  which  intercourse  is  desired. 

In  all  those  European  countries  in  which,  since  the  begin- 
ning of  the  war,  there  have  been  radical  changes  in  govern- 
ment and  policies  the  old  laws  must  be  observed  with  very 
much  greater  caution  than  in  other  countries,  and  proportionate 
effort  should  be  made  to  ascertain  the  latest  recjuirements. 

Abyssinia 

No  special  regulations  exist  in  Abyssinia  concerning  com- 
mercial travelers.  Samples  are  treated  as  ordinary  merchan- 
dise or  property. 

Afghanistan 

No  special  regulations  exist  concerning  commercial  trav- 
elers. 

Antigua 

See  "British  Possessions  and  Protectorates." 

Arabia 

No  special  regulations  exist  concerning  commercial  trav- 
elers. 

Argentina 

Whether  selling  goods,  showing  samples,  or  soliciting  or- 
ders, commercial  travelers  must  secure  a  license.  The  charge 
for  a  license  is  different  in  each  state  and  varies  according 


342  TRADE    REGULATIONS 

to  the  type  of  merchandise  sold.  In  the  city  of  Buenos  Aires  the 
annual  license  tax  is  500  pesos,  but  it  sometimes  runs  as  high 
as  1,000  pesos  (Argentine  currency). 

The  following  is  a  list  of  the  license  fees  charged  in  the 
various  states.  The  amount  in  each  case  is  given  in  Argentine 
currency. 

Buenos  Aires.    400  pesos  per  annum. 

Catamarca.     300  pesos  per  annum.     A  license  for  the  privilege  of 

selling  a  single  article  in  mercers'  or  grocers'  goods  and  of  boots 

and  shoes,  costs  only  200  pesos.    Licenses  must  be  taken  out  for 

the  whole  year  and  are  not  transferable. 
Chubut.    50  to  500  pesos. 
Cordoba.     400  pesos  per  year ;  half-yearly  licenses,  given  only  after 

June  30,  300  pesos.     Licenses  are  transferable  in  case  they  are 

taken  out  by  a  business  house  for  an  employee. 
Entre  Rios.    600  pesos  per  annum ;  after  June  30,  300  pesos.    Licenses 

are  not  transferable. 
Gran  Chaco.    According  to  \zw,  50  to  700  pesos  per  annum  ;  in  actual 

practice  the  local  office  collects  only  50  to  100  pesos. 
JujuY.     For  selling  one  kind  of  merchandise,   100  pesos;   for  each 

other  class  of  merchandise  sold,  an  additional  100  pesos. 
La  Pampa.     100  to  700  pesos  per  annum;  if  the  license  is  taken  out 

after  the  middle  of  the  year  the  fee  is  proportionate  to  the  time 

during  which  the  license  is  to  be  held. 
Mendoza.     700  pesos  per  annum;  January  to  April,  600  pesos;  May 

to    August,    600    pesos;    September    to    December,    400    pesos. 

Licenses  are  not  transferable. 
MisiONES.    100  pesos  per  annum. 
National  Territories.    100  pesos  per  annum. 
Nequen.    No  license  is  required. 

RiojA.    200  pesos  per  annum  ;  after  July  8,  100  pesos. 
Rio  Negro.    100  pesos  per  annum. 
Salta.     For  selling  tissues,    1,000  pesos;  haberdashery,  600  pesos; 

groceries,  400  pesos;  hardware,  550  pesos;  china  and  glassware, 

250  pesos ;  boots  and   shoes,  400  pc<;os ;  hats,  200  pesos ;  men's 

and  boy's  clothing,  800  pesos ;  women's  clothing,  200  pesos ;  sugar, 

1,000  pesos;  wines,  200  pesos;  drugs,  300  pesos;  perfumery,  300 

pesos. 


COMMERCIAL    TRAVELERS  343 

Licenses  in  this  province  may  be  taken  out  for  6  months, 
counting  from  January  i  to  June  30  and  from  July  i  to 
December  31.  Their  cost  must  be  paid  before  operations  are 
commenced.  The  fact  of  withdrawing  samples  from  any  railway 
station  in  the  province  or  of  offering  merchandise  for  sale  by 
means  of  catalogues  or  references  is  understood  as  implying  that 
the  commercial  traveler  has  commenced  doing  business. 

San  Juan.  400  pesos  per  annum.  Licenses  are  not  transferable  and 
cannot  be  taken  out  for  a  portion  of  a  year. 

San  Luis.  400  pesos  per  annum ;  licenses  are  issued  also  for  3  or  6 
months. 

Santa  Fe.    400  pesos  per  annum. 

Santiago  del  Estero.  300  pesos  per  annum.  Licenses  terminate  on 
December  31,  irrespective  of  the  date  on  which  they  are  taken  out. 

Tucuman.  600  pesos  per  annum ;  after  June  30,  300  pesos.  Licenses 
are  personal  but  are  transferable  by  authorization  of  the  business 
house  by  which  they  are  taken  out. 

Samples  without  commercial  value  are  passed  by  the  Ar- 
gentine customs  without  payment  of  import  duty.  An  import 
duty  is  charged  on  samples  of  value.  It  is  refunded  if  the 
samples  are  re-exported  within  6  months. 

Printed  circulars,  cards,  pamphlets,  and  catalogues  im- 
ported in  quantities  by  commercial  travelers  are  subject  to  duty. 
The  duty  on  advertising  matter  printed  on  cardboard  is  42 
per  cent  on  the  fixed  valuation,  or  0.60  pesos  gold  per  kilogram, 
which  is  equivalent  to  about  $1 1  per  100  lbs. ;  on  matter  printed 
on  bristol-board  the  duty  is  slightly  higher,  about  $11.38  per 
100  lbs.  Advertising  matter  printed  on  paper  and  ordinary 
matter  printed  on  cardloard,  are  subject  to  a  duty  of  $4.73 
per  100  lbs. 

A  commercial  treaty  between  the  United  States  and  Ar- 
gentina, similar  to  those  already  consummated  between  the 
United  States  and  Uruguay  and  between  the  United  States 
and  Guatemala,  regarding  the  regulations  concerning  commer- 
cial travelers  is  being  favorably  discussed  at  the  present  time. 
(See  "Uruguay.") 


344  TRADE    REGULATIONS 

Australian  Commonwealth 

Generally  speaking,  in  the  provisions  of  the  Australian 
Commonwealth  concerning  commercial  travelers,  no  regula- 
tions exist  which  require  them  to  take  out  licenses.  An  income 
tax  is  required  from  resident  agents  in  Victoria,  New  South 
Wales,  Queensland,  Western  Australia,  and  Tasmania.  In 
South  Australia  an  income  tax  on  profits  is  legalized  but  not 
enforced.  The  amount  of  this  tax  varies  from  5  per  cent  on 
gross  sales  to  5  per  cent  on  the  net  amount  for  which  the 
goods  have  been  sold.  In  Queensland  resident  agents  of  British 
firms  have  to  take  out  a  business  license  which  costs  £2  (about 
$10). 

Duty  is  usually  levied  on  all  samples  of  commercial  value, 
but  is  refunded  if  samples  are  taken  out  of  the  country  within 
12  months. 

The  railroads  usually  make  concessions  to  travelers.  In 
Tasmania,  for  instance,  every  commercial  traveler  is  allowed 
to  take  112  lbs.  of  samples  free  of  charge.  Commercial  trav- 
elers holding  first-class  season  tickets  are  allowed  to  carry 
2  cwt.  of  luggage  free.  Resident  agents  of  foreign  firms  must 
pay  f  10  per  annum  for  an  importer's  license. 

Austria* 

Foreign  commercial  travelers  must  provide  themselves  with 
"Certificates  of  Legitimation,"  which  may  be  issued  by  any 
chamber  of  commerce  or  by  the  mayor  of  a  city  in  the  United 
States. 

Commercial  travelers,  whether  native  or  foreign,  are 
strictly  forbidden  to  solicit  orders  from  private  individuals. 
The  regulations  prescribe  that  the  dealings  of  all  travelers  or 
agents  must  be  confined  to  such  firms  or  individuals  as  in  the 
course  of  their  business  actually  make  use  of  the  goods  ordered, 
excepting  in  certain  specific  cases.    Travelers  may  seek  orders 

*These  are  the  regulations  which  were  in  force  before  the  war. 


COMMERCIAL    TRAVELERS  345 

from  anyone  for  the  following  classes  of  goods,  whether  the 
person  whose  business  is  being  solicited  deals  in  the  goods  or 
not: 

1.  Machines  of  all  kinds  for  plants,  including  motors  and 

their  component  parts. 

2.  Building  material,  including  artificial  stonework  of  all 

kinds. 

3.  Motor  cars. 

4.  Engineering  requisites  for  heating  and  lighting  appara- 

tus and  for  waterworks. 

5.  Dies. 

6.  Wooden  roller  and  Venetian  blinds. 

7.  Fine  or  embroidered  linen. 

8.  Sewing  machines,  typewriters,  and  bicycles. 

Solicitation  of  orders  for  other  classes  of  goods  from  per- 
sons not  trading  in  such  goods,  is  permitted  only  if  the  person 
giving  the  order  expressly  invites  the  soliciting  party.  Such 
invitations  must  be  spontaneous  and  must  be  specific,  not  gen- 
eral, in  character.  These  regulations  are  enforced  with  par- 
ticular vigor  with  regard  to  the  solicitation  of  orders  for  gro- 
cers' and  druggists'  goods  from  persons  neither  dealing  in  nor 
making  business  use  of  such  goods. 

Goods  carried  by  commercial  travelers  must  serve  merely 
as  samples  and  must  not  be  sold. 

In  some  cases  the  railroads  make  a  reduction  in  rates  for 
the  conveyance  of  cases  of  patterns  and  samples. 

The  samples  imported  by  commercial  travelers  are  exempt 
from  import  duty,  if  the  same  privilege  is  accorded  Austrian 
representatives  by  the  government  of  the  country  from  which 
the  traveler  comes. 

Bahamas 

See  "British  Possessions  and  Protectorates." 


346  TRADE    REGULATIONS 

Barbados 

See  "British  Possessions  and  Protectorates." 

Bechuanaland 

See  "British  Possessions  and  Protectorates." 

Beira 

A  license  tax  of  $50  is  levied  on  the  commercial  traveler 
for  each  visit  which  does  not  exceed  one  month  in  duration. 

Belgium 

The  following  are  recent  regulations  covering  imports  into 
Belgium  and  exports  from  that  country. 

"All  foodstuffs  can  be  imported  without  license  except 
sugar,  cereals  for  the  making  of  bread,  barley,  oats,  wines,  and 
spirituous  liquors.  Licenses  for  these  products  are  issued  by 
the  Ministry  of  Industry,  Labor  and  Revictualling.  The  same 
ministry  likewise  issues  import  licenses  for  raw  tobacco. 

"Clothing  and  shoes,  generally  speaking,  can  be  imported 
without  license.  Licenses  are  likewise  eliminated  for  certain 
raw  materials  and  for  a  number  of  manufactured  products. 
Manufactures  of  cotton  goods  are  not  subject  to  license. 

"For  the  importation  of  raw  tobacco,  licenses  must  be  re- 
quested by  Belgian  purchasers  through  a  group,  the.  delegate 
of  which  is  Mr.  Jacobs,  5  rue  Vandermaelen,  Brussels.  Li- 
censes for  raw  cotton  must  be  requested  by  the  purchasers  in 
Belgium. 

"All  merchandise  subject  to  import  licenses  can  be  stored 
on  arrival  in  bonded  warehouses  in  Antwerp,  pending  the 
obtaining  of  the  licenses." 

All  exports  from  Belgium  are  subject  to  licenses  which  are 
issued  by  the  Ministry  of  Industry,  Labor  and  Revictualling 
and  by  the  Ministry  of  Economic  Affairs,  on  individual  re- 
quests of  exporters. 


COMMERCIAL    TRAVELERS  347 

The  treatment  accorded  to  commercial  travelers  from  for- 
eign countries  varies  according  to  the  reciprocal  arrangement 
between  the  traveler's  country  and  Belgium.  Usually  no  li- 
cense fee  is  charged  if  the  country  from  which  the  traveler 
comes  does  not  require  such  fees  from  Belgian  travelers,  un- 
less by  the  occupation  of  a  house  he  becomes  ratable  as  a  house- 
holder. In  all  cases,  however,  travelers  must  furnish  proof  of 
their  nationality  by  means  of  passports  and  other  documents. 

There  are  special  railroad  regulations  in  Belgium  for  com- 
mercial travelers.  Sample  trunks  weighing  less  than  80  kilo- 
grams and  less  than  one-half  cubic  metre  in  volume  must  be 
carried  in  the  baggage  car  of  a  passenger  train  and  must  be 
paid  for  at  the  ordinary  carriage  rate.  When  weighing  over 
50  kilograms  such  trunks  must  be  furnished  with  two  solid 
handles  and  broad  straps.  Trunks  exceeding  80  kilograms  in 
weight  or  one-half  cubic  metre  in  volume  must  be  sent  sep- 
arately by  goods  train  and  are  subject  to  the  ordinary  rate. 
Moreover,  in  common  with  other  passengers,  commercial  trav- 
elers have  a  right  to  take,  free  of  charge,  personal  baggage 
which  does  not  weigh  more  than  25  kilograms. 

Belgium  has  separate  arrangements  with  every  country 
concerning  the  entry  of  samples.  The  arrangement  with  the 
United  States  in  this  matter  may  be  ascertained  from  the  De- 
partments of  State  or  Commerce. 

Belgian  Congo 

License  and  a  fee  are  required  from  all  firms  doing  busi- 
ness in  Belgian  Congo,  which  have  no  establishments  in  that 
country  on  which  the  ordinary  local  taxes  are  payable.  The 
fee  is  500  francs  if  the  business  includes  the  purchase  or  sale 
of  rubber,  copal,  or  ivory,  or  the  sale  of  goods  other  than 
fresh  goods  on  board  vessels  anchored  in  the  Lower  Congo 
River;  and  200  francs  if  the  business  of  the  firm  is  of  any 
other  nature.    On  payment  of  the  fee  a  permit  is  issued  to  the 


348  TRADE    REGULATIONS 

traveler  authorizing  him  to  do  business  in  any  part  of  the 
country. 

An  income  tax  is  levied  on  travelers  who  are  domiciled  in 
the  country  or  have  offices  or  warehouses  therein. 

Samples  without  commercial  value  are  admitted  free.  A 
deposit  of  the  amount  of  duty  payable  on  samples  of  value  is 
required. 

No  duty  is  levied  on  imported  catalogues. 

Bermuda 

See  "British  Possessions  and  Protectorates." 

Bolivia 

Commercial  travelers  in  Bolivia  are  obliged  to  pay  a  tax 
in  every  city  they  visit.  A  small  duty  averaging  from  3  to  8 
cents  per  pound  is  levied  on  advertising  matter  carried  by 
travelers  for  complimentary  distribution.  The  regulations  in 
force  and  the  taxes  levied  in  the  principal  towns  of  each  de- 
partment are  as  follows: 

CocHABAMBA.    The  tax  is  1,000  bolivianos  per  annum. 

La  Paz.     The  tax  is  250  bohvianos  per  annum. 

Oruro.  The  tax  is  250  bohvianos  per  annum.  If  the  traveler  should 
arrive  in  July,  he  must  pay  a  full  year's  tax  and  becomes  liable 
to  tax  again  on  January  i  of  the  following  year. 

PoTOSi.     The  tax  is  200  bolivianos  per  annum. 

Santa  Cruz.  An  annual  tax  of  400  to  1,000  bolivianos  is  levied.  The 
amount  assessed  varies  according  to  the  class  in  which  the 
traveler  is  placed  by  the  municipal  authorities. 

Sucre.  All  commercial  travelers  entering  Sucre  are  required  to  report 
to  the  Intendente  Municipal  and  pay  a  tax,  valid  for  the  year, 
according  to  the  following  schedule : 

ist  class 300  bolivianos 

2nd  class 100  bolivianos 

3rd  class 100  bolivianos 

Traveling  merchants 50  bolivianos 

Pedlers  20  bolivianos 


COMAIERCIAL    TRAVELERS 


349 


The  Finance  Committee  of  the  Municipal  Council  determines 
the  class  to  which  the  traveler  or  agent  belong-s. 

Tarija.    The  tax  is  200  bolivianos  per  annum. 

TupiZA.     The  tax  is  200  bolivianos  per  annum. 

Uyuni.  Travelers  are  supposed  to  be  taxed  from  100  to  200  bolivianos 
for  each  visit,  but  these  tax  regulations  are  rarely  enforced. 
Usually  a  sum  somewhat  less  than  the  above  amount  is  collected, 
if  the  traveler  reports  his  arrival  to  the  authorities.  Should  he 
fail  to  do  so,  however,  he  is  liable  for  the  full  tax. 

Brazil 

There  is  no  federal  tax  levied,  but  travelers  are  taxed  in 
many  individual  states,  while  in  others  they  are  required  to 
take  out  a  trader's  license  if  acting  in  such  a  capacity.  A 
good  many  municipalities,  moreover,  require  the  traveler  to 
take  out  a  hawker's  license  if  he  can  be  shown  to  be  in  this 
class.  The  regulations  in  force  and  the  taxes  levied  in  the 
various  states  and  municipalities  are  as  follows: 

Bahia   (State).  100  milreis  per  annum.     If  the  traveler  leaves  the 

country  and  returns  the  same  year,  a  new  license  is  required. 
Maranham  (State).    250  milreis  per  annum. 

(Municipal).     100  milreis  per  annum. 
MiNAS  Geraes  (State).    55  milreis  per  annum.    If  a  trader's  license 

is  taken  out  both  state  and  municipal  taxes  are  levied;  if,  however, 

merely  a  hawker's  license  is  required  there  is  a  charge  only  by  the 

municipality. 

(Municipal).     Lavras.     300  milreis  per  annum,  if  travelers  do 

business  with  private  individuals.    Otherwise  no  tax  is  levied. 

Para  (State).    300  milreis  per  annum.    The  authorities  in  this  state 

are  very  lax  in  enforcing  the  tax  regulations. 

(Municipal).     365  milreis  for  each  visit.     A  trader's  license  is 
necessary  if  the  traveler  sells  the  goods  he  carries. 
Pernambuco    (State).     600  milreis  per  annum.     Travelers  usually 

avoid  this  license  tax  by  making  business  connections  with  some 

local  merchant. 
Rio  DE  Janeiro  (State).    No  tax  is  levied.    If,  however,  travelers  sell 

the  goods  they  carry,  they  must  take  out  a  trader's  license  for 

which  a  state  or  municipal  tax  of  varying  amount  is  charged. 


350  TRADE    REGULATIONS 

Rio  Grande  do  Sul  (State).    200  milreis  per  annum. 

(Municipal)  :  Bage,  800  milreis  per  annum;  Pelotas,  200  milreis 
per  annum;  Porto  Alegre,  100  milreis  per  annum;  Rio 
Grande,  no  taxes  levied ;  Sao  Borga,  60  milreis  per  annum ; 
Sao  Gabriel,  200  milreis  per  annum ;  Uruguayana,  300  milreis 
per  annum. 
Sao  Paulo  (State).    No  tax  is  levied. 

(Municipal):   Santos,  500  milreis  per  annum;   Sao  Paulo,  1,000 
milreis  per  annum. 

Usually  power  of  attorney  is  necessary  for  a  traveler  re- 
ceiving payment  for  sales.  Such  power  must  be  registered  be- 
fore a  notary  public.    A  small  fee  is  charged  for  registration. 

The  Brazilian  Budget  Law  in  effect  January  i,  1916,  pro- 
vided for  the  free  admission  under  bond  of  samples  carried 
by  commercial  travelers.  Such  samples  are  subject  to  the  pay- 
ment of  a  tax  of  5  per  cent  of  their  official  valuation  and  to 
other  charges,  such  as  port  taxes,  storage,  handling  fees,  etc. 

No  rebates  to  commercial  travelers  are  granted  by  the  rail- 
ways, except  by  the  Leopoldine  Railway,  which  grants  20  per 
cent  reduction  on  travelers'  samples  and  fares. 

British  Guiana 

See  "British  Possessions  and  Protectorates"  just  below. 

British  Honduras 

See  "British  Possessions  and  Protectorates"  just  below. 

British  Possessions  and  Protectorates 

The  regulations  governing  commercial  travelers  in  the  fol- 
lowing protectorates  and  possessions  of  Great  Britain  are  simi- 
lar and  for  this  reason  are  given  here  in  group  form.  The 
British  possessions  not  included  in  this  group  will  be  found 
elsewhere  in  the  digest  in  their  proper  alphabetical  position. 

1.  Antigua  3.  Barbados 

2.  Bahamas  4.  Bechuanaland 


COMMERCIAL    TRAVELERS 


351 


5- 

Bermuda 

22. 

Mauritius 

6. 

British  Guiana 

2Z- 

Montserrat 

7- 

British  Honduras 

24. 

North  Borneo 

8. 

Ceylon 

25- 

Northern  Nigeria 

9- 

Cyprus 

26. 

Nyasaland  Protectorate 

10. 

Dominica 

27. 

Rhodesia 

II. 

East  Africa  Protectorate 

28. 

St.  Helena 

12. 

Falkland  Islands 

29. 

St.  Lucia 

13- 

Federated  Malay 

States 

30. 

St,  Vincent 

14. 

Fiji 

31- 

Seychelles 

15- 

Gambia 

32. 

Sierra  Leone 

16. 

Gibraltar 

33- 

Southern  Nigeria 

17- 

Gold  Coast 

34- 

Straits  Settlements 

18. 

Grenada 

35- 

Sudan,  Anglo-Egyptian 

19. 

Hong  Kong 

36. 

Trinidad 

20. 

Jamaica 

37- 

Uganda 

21. 

Malta 

38. 

Zanzibar 

In  the  above  mentioned  British  possessions  and  protector- 
ates a  license  is  usually  required  and  a  fee  is  charged  if  trav- 
elers sell  samples  or  goods.  Also,  resident  agents  and  mer- 
chants require  a  trade  license.  The  fees  vary  from  £1  to  £20. 
In  Dominica  travelers  disposing  of  goods  must  obtain  a  license 
costing  from  15s.  to  £5,  and  in  British  Honduras  a  fee  of 
£10,  8s.,  4d.  is  charged.  Licenses  remain  in  force  until  De- 
cember 31.  Income  taxes  are  levied  on  resident  agents,  the 
income  tax  in  Dominica  being  3  J/  per  cent.  Generally,  how- 
ever, only  a  trade  license  is  required  from  resident  traders. 

Samples  of  value  are  admitted  on  deposit  of  security,  v^^hich 
is  refunded  if  the  samples  are  taken  out  of  the  country  within 
a  specified  period  varying  from  3  months  to  i  year. 

In  St.  Lucia  and  Hong  Kong  no  duties  are  levied  and  no 
deposit  is  required  even  though  the  samples  are  of  commercial 
value.  Alcoholic  liquors  brought  in  by  commercial  travelers 
are  an  exception  to  this  rule. 

Certain  privileges  are  accorded  on  some  of  the  railways  in 
respect  to  reduced  fares  or  freight  rates.     This  is  particularly 


352  TRADE    REGULATIONS 

true  in  the  case  of  the  Cape  government  railways,  the  Rhodesia 
railways  south  of  Bulawayo  in  the  Bechuanaland  Protectorate. 
On  these  roads  travelers  regularly  employed  by  a  firm,  on  pro- 
duction of  proof,  will  be  furnished  with  a  permit  to  travel 
first-class  with  a  second-class  ticket.  They  are  also  granted 
the  free  conveyance  of  samples  of  200  lbs.  in  weight — twice 
the  amount  granted  other  passengers  on  the  railways  of  British 
Guiana. 

On  the  railways  of  the  Federated  Malay  States,  commer- 
cial travelers  are  allowed  400  lbs.  of  personal  luggage  free. 
The  allowance  to  ordinary  passengers  is  about  one-third  of 
this  amount.  On  any  excess  weight  commercial  travelers  pay 
only  half  of  the  ordinary  excess  baggage  rates. 

In  Southern  Nigeria  first-class  tickets  at  half  the  tariff  rate 
for  each  single  journey  are  issued  to  representatives  of  any 
firm  whose  railway  consignments  aggregate  in  freight  charges 
£2,500  per  annum,  and  a  first-class  ticket  is  issued  free  of 
charge  for  the  year  to  the  agent  or  to  the  head  of  the  firm 
whose  consignments  aggregate  in  freight  charges  £15,000  or 
over  per  annum. 

Bulgaria 

Commercial  travelers  in  Bulgaria  must  be  provided  with 
a  legitimation  certificate.  This  certificate  must  be  issued  in 
the  form  and  manner  prescribed  by  law  and  according  to  the 
agreement  between  Bulgaria  and  the  country  from  which  the 
traveler  comes. 

Licenses  are  required  for  all  commercial  travelers.  The 
license  is  issued  by  the  ministry  of  commerce  and  is  delivered, 
to  the  traveler  by  the  custom  house  of  the  first  town  he  enters 
in  Bulgaria.  The  application  for  the  license  must  contain  a 
description  of  the  goods  to  be  sold,  the  name  of  the  firm  rep- 
resented by  the  traveler,  and  the  name  of  the  person  for  whom 
the  license  is  requested.    The  application  must  also  be  accom- 


COMAIERCIAL    TRAVELERS  353 

panied  by  a  certificate  of  identity  and  a  power  of  attorney 
from  the  firm  represented. 

The  fees  are  determined  according  to  the  nature  of  the 
business  and  are  as  follows: 

Fees  for  One  Year 

ist  class — 150   francs;    if   more   than   one   firm   is   represented,    lOO 

francs  additional. 
2nd     "    — 100    francs ;    if    more    than    one    firm    is    represented,    75 

francs  additional. 
3rd     "    — 50    francs;    if    more    than    one    firm    is    represented,    50 

francs  additional. 

Fees  for  Six  Months 

ist  class — 100   francs;   50    francs   additional   if  more   than   one  firm 

is  represented. 
2nd     "    — 75    francs;    35    francs    additional    if   more    than    one   firm 

is  represented. 
3rd     "    — 35    francs;    25    francs    additional    if   more    than    one    firm 

is  represented. 

Travelers  are  strictly  forbidden  to  sell  the  samples  or  goods 
they  carry. 

Canada 

There  are  no  special  regulations  affecting  commercial  trav- 
elers, but  those  who  sell  goods  or  carry  on  a  hawker's  trade 
must  take  out  a  pedler's  license.  They  are  not  subject  to  in- 
come tax,  nor  are  they  required  to  produce  any  document  au- 
thorizing them  to  transact  business  on  behalf  of  their  principal. 
In  some  municipahties  travelers  selling  direct  to  consumers 
may  be  required  to  pay  a  fee. 

In  British  Columbia  no  person  may  act  as  the  representative 
or  agent  of  a  foreign  joint-stock  company  which  has  not  been 
licensed  in  the  Province  of  British  Columbia.  The  fees  for  such 
licenses  are  assessed  on  the  nominal  capital  of  the  company  and 
vary  from  $25,  in  the  case  of  a  company  with  a  capital  of 


354 


TRADE    REGULATIONS 


$10,000,  to  $277,50  in  the  case  of  a  company  with  a  capital 
of  $500,000.  For  every  $5,000  of  capital  in  excess  of  $500,- 
000  an  additional  $25  is  charged.  If  the  company  will  show 
that  the  greater  part  of  the  capital  is  invested  outside  the  prov- 
ince the  tax  may  be  fixed  at  $250. 

A  company  is  liable  to  a  fine  of  $50  per  day  and  agents  and 
travelers  to  a  penalty  of  $20  per  day  for  every  day  on  which 
they  carry  on  business  so  long  as  the  company  remains  un- 
registered or  unlicensed.  During  such  time  the  company  is 
also  unable  to  sue  in  the  courts  of  the  province. 

In  the  Yukon  Territory  commercial  travelers  must  secure 
a  license  at  the  cost  of  $500,  unless  their  company  has  an 
established  place  of  business  within  the  city  of  Dawson.  Li- 
censes expire  on  the  31st  of  December  succeeding  the  date  of 
issue. 

Samples  of  commercial  value  are  admitted  on  the  deposit 
of  a  sum  equal  to  the  duty.  This  payment  is  refunded  if  the 
samples  are  re-exported  within  12  months  from  the  time  of 
entry.  This  ruling  does  not  extend  to  cards,  portfolios,  paste- 
board boxes,  and  other  coverings  containing  samples  of  cloth, 
edgings,  textile  fabrics,  buttons,  and  other  articles  for  use 
only  as  samples.  These  and  other  articles  of  no  commercial 
value  are  admitted  free. 

Ceylon 

See  "British  Possessions  and  Protectorates." 

Chile 

No  regulations  of  any  kind  exist  concerning  travelers  and 
consequently  no  license  is  required. 

Samples,  provided  they  are  not  whole  pieces  of  stuff  or 
complete  sets  of  merchandise,  are  admitted  free,  if  dispensed 
to  private  warehouses.  If  designed  for  general  consumption 
throughout  the  country,  duty  must  be  paid  within  6  months 


COMMERCIAL    TRAVELERS  355 

1 

after  importation.     If  the  samples  are  re-exported  within  6 
months,  they  are  not  subject  to  duty. 

A  certain  amount  of  advertising  matter  is  admitted  free. 
What  this  amount  shall  be  in  any  particular  case  is  wholly  at 
the  discretion  of  the  custom  house  officials.  The  rate  of  duty 
established  by  law  varies  according  to  the  nature  of  the  mat- 
ter from  I  peso  to  2  pesos  per  kilogram. 

China 

No  special  regulations  affecting  travelers  exist  in  China,  no 
fees  or  license  taxes  are  levied,  and  the  power  of  attorney 
is  not  required  to  do  business. 

The  Chinese  railroads  grant  no  special  rate  reductions  for 
commercial  travelers. 

Samples  are  not  liable  to  duty  if  imported  in  reasonable 
quantities  for  exhibition  and  not  for  sale.  Travelers  may, 
nevertheless,  sell  their  samples  without  having  to  procure  a 
license. 

Colombia 

Commercial  travelers  must  pay  taxes  and  local  dues,  which 
vary  according  to  the  class  of  operations  in  which  they  are 
engaged.  There  are  no  federal  taxes,  all  dues  being  levied  by 
individual  municipalities.  The  following  is  the  schedule  of 
local  dues : 

Barranquilla.     Neither  local  dues  nor  taxes  exist. 

Bogota,    Neither  local  dues  nor  taxes  exist. 

Call     A  municipal  tax  of  about  $30  is  levied,  good  for  130  days. 

If    the    traveler    remains    longer    he    must    pay    $5    per    month 

additional. 
Cartagena.     $10  to  $25  per  annum   for  commercial   travelers;  $60 

per  annum  for  permanent  agents. 
Honda.     Neither  local  dues  nor  taxes  exist. 
Manizales.    $10  per  month. 
Medellin.     The  minimum  charge  is  about  $40   for  4  months.     If 


356 


TRADE    REGULATIONS 


the  traveler  intends  to  remain  longer  than  4  months,  he  should 
notify  the  municipal  authorities  hefore  beginning  operations. 
Failure  to  observe  these  regulations  subjects  him  to  a  fine. 

Santa  Marta.     $5  per  month. 

TuMACO.     Neither  local  dues  nor  taxes  exist. 

If  samples  consist  of  wares  which  can  be  put  to  indus- 
trial use,  duty  is  levied  on  them  according  to  the  class  to  which 
they  belong.  This  duty,  minus  2  per  cent  per  month  interest, 
is  refunded  if  the  samples  are  re-exported.  Samples  unfit  for 
industrial  uses  are  admitted  free.  All  samples  may  be  sold 
without  the  procuring  of  a  license. 

Advertising  matter  is  subject  to  a  small  duty. 

Corea 

No  special  regulations  exist  concerning  commercial  travel- 
ers and  no  tax  is  levied  on  their  selling  activities. 

Samples  are  usually  admitted  free  of  duty  whether  of  value 
or  not.  If  of  undue  quantity,  however,  they  are  regarded  as 
ordinary  merchandise  and  duty  is  then  levied  on  them.  If 
they  are  re-exported  within  13  months,  this  duty  will  be  re- 
funded. 

Costa  Rica 

Costa  Rica  levies  no  state  taxes  and  requires  the  payment 
of  no  license  fees.  In  the  municipalities  of  San  Jose,  Limon, 
and  Puntarenas  municipal  taxes  which  vary  from  15  to  100 
colones  are  levied.  In  practice  these  taxes  are  not  enforced 
unless  a  showroom  is  hired,  and  even  then  they  are  enforced 
only  occasionally. 

Some  railways  grant  a  rebate  of  50  per  cent  on  cases  of 
samples  when  they  accompany  a  traveler. 

Duty  must  be  paid  on  samples  of  commercial  value,  but 
this  payment,  less  a  charge  of  5  cents  per  kilogram,  is  re- 
funded if  the  samples  leave  the  country  within  90  days.     On 


COMMERCIAL    TRAVELERS  357 

samples  of  jewelry  and  all  manufactured  articles  of  gold  or 
silver  no  refund  duty  is  granted. 

Cuba 

All  persons  engaged  in  commerce  are  required  to  take  out 
a  license  in  each  municipal  division  of  the  republic.  No  fee 
is  charged  for  this  license.  No  other  special  regulations  exist 
regarding  commercial  travelers,  though  it  is  advisable  for  them 
to  be  provided  with  passports,  power  of  attorney,  and  other 
documents. 

There  are  lengthy  regulations  concernmg  the  importation 
of  samples.  Certain  kinds  of  samples  are  admitted  free, 
whether  of  commercial  value  or  not.  On  other  kinds  a  deposit 
of  duty  is  required  and  is  refunded,  with  a  deduction  of  a  cer- 
tain percentage  by  the  custom  house,  if  the  samples  are  re- 
exported. Duty  is  levied  on  advertising  matter  according  to 
the  character  of  the  article  advertised. 

Curacao 

No  regulations  for  commercial  travelers  exist.  Samples 
other  than  those  of  no  commercial  value  are  inspected  by  the 
customs  officials.  At  the  time  of  this  inspection  security  must 
be  given  for  the  payment  of  import  duties.  The  security  is 
refunded  if  the  articles  are  re-exported. 

Cyprus 

See  "British  Possessions  and  Protectorates." 

Denmark 

The  cost  of  a  license  for  a  traveler  representing  one  firm 
is  160  kroner  (about  $45).  A  supplementary  tax  of  80  kroner 
is  payable  for  each  additional  firm  which  the  traveler  repre- 
sents. When  applying  for  a  license,  a  certificate  of  identifi- 
cation from  the  firm  represented  is  necessary.     The  license 


358  TRADE    REGULATIONS 

holds  good  for  one  year  from  the  date  of  issue.  It  must  be 
indorsed  by  both  poHce  and  customs  authorities  in  each  town 
the  traveler  visits. 

Travelers  are  not  supposed  to  sell  samples  except  as  part 
of  an  order  for  not  less  than  40  kroner  worth  of  goods.  Duty, 
returned  if  re-exportation  takes  place  within  6  months,  is  pay- 
able on  samples  brought  in  by  travelers.  A  fee  of  about  $2 
is  paid  on  exportation. 

In  Danish  Iceland  and  Faroe  Islands,  commercial  travelers 
must  take  out  a  license  and  pay  a  fee.  For  such  license,  or 
certificate,  a  payment  must  be  made  varying  from  10  to  200 
kroner.  If  the  traveler  represents  more  than  one  firm,  an  ad- 
ditional fee  is  levied  which  varies  from  10  to  50  kroner.  Trav- 
elers domiciled  in  the  country  must  take  out  a  trading  license 
in  addition  to  the  ordinary  license. 

Dominica 

'        See  "British  Possessions  and  Protectorates." 

Dominican  Republic 

Commercial  travelers  must  pay  for  a  license,  which  costs 
$10  annually.  There  is  no  tax  on  advertising  matter.  Sam- 
ples not  exceeding  $2,000  in  value  are  admitted  free  under 
bond,  which  is  remitted  if  the  articles  leave  the  republic  within 
4  months.  This  period  may  be  extended.  Power  of  attorney 
is  desirable,  but  must  be  legalized  at  a  cost  of  $3. 

Dutch  East  Indies 

Travelers  must  report  to  the  chief  of  the  local  adminis- 
tration within  3  days  after  their  arrival.  Samples  other  than 
those  of  no  commercial  value  are  inspected  by  the  customs 
officials.  At  the  time  of  this  inspection  security  must  be  given 
for  the  payment  of  import  duties.  The  security  is  refunded  if 
the  articles  are  re-exported. 


commercial:  travelers  359 

East  Africa  Protectorate 

See  "British  Possessions  and  Protectorates." 

Ecuador 

A  tax  of  lOO  sucres  (about  $50)  is  levied  each  time  the 
traveler  enters  the  republic.  A  municipal  permit  costing  100 
sucres  is  required  in  a  number  of  cities  in  addition  to  the  state 
license. 

It  is  advisable  for  travelers  to  carry  a  certificate  of  identity, 
passports,  and  power  of  attorney. 

Samples  of  no  value  are  exempt  from  duty ;  those  of  value 
are  admitted  free  of  duty  temporarily,  if  guarantee  is  furnished 
that  they  will  be  re-exported.  Advertising  matter  is  admitted 
free,  but  should  be  marked  in  such  a  way  as  to  indicate  that  it 
is  for  complimentary  distribution. 

The  Guayaquil  and  Quito  Railway  Company  grants  to 
commercial  travelers  a  25  per  cent  reduction  in  rates  on 
baggage  shipped  over  its  lines  by  express. 

Egypt 

No  special  regulations  exist  and  no  license  fees  of  any 
kind  are  required  from  travelers,  even  though  they  sell  their 
samples.  Samples  of  value  are  admitted  on  payment  of  the 
deposit  of  duty.  This  deposit  is  refunded  if  the  samples  are 
re-exported  within  12  months. 

Commercial  catalogues  and  advertising  matter  imported 
into  Egypt  are  dutiable,  although  in  practice  this  duty  is  never 
collected  except  on  a  nominal  valuation. 

Equatorial  Africa 

Travelers  are  required  to  pay  a  tax  of  about  $50  per  month. 

Falkland  Islands 

See  "British  Possessions  and  Protectorates." 


360  TRADE    REGULATIONS 

Federated  Malay  States 

See  "British  Possessions  and  Protectorates." 

Fiji 

See  "British  Possessions  and  Protectorates." 

France 

France  receives  the  commercial  traveler  in  a  manner  corre- 
sponding to  the  treatment  accorded  French  travelers  in  the 
homeland  of  the  visitor.  If  a  traveler  represents  several  firms, 
entirely  on  a  commission  basis,  he  will  have  to  take  out  a 
trading  license.  Those  selling  the  actual  goods  they  carry  are 
liable  also  to  an  additional  tax  which  in  practice  is  seldom 
collected. 

All  foreigners  resident  in  France  are  required  to  register 
at  police  headquarters  and  to  take  out  a  certificate  for  which 
23^  francs  (about  50  cents)  is  charged. 

Special  privileges  may  be  obtained  from  the  railroads  on 
payment  of  a  given  sum  and  by  special  arrangement  which, 
in  normal  times,  saves  20  to  50  per  cent  of  the  usual  rate. 

Samples  of  commercial  value  are  admitted  on  deposit.  All 
duty  is  refunded  if  the  samples  are  taken  out  of  the  country 
within  a  year.  A  certificate  of  identity  is  necessary  when  such 
refund  is  claimed  by  the  traveler. 

Gambia 

See  "British  Possessions  and  Protectorates." 

Germany 

Conditions  In  Germany  at  this  time  are  so  uncertain  that 
it  is  impossible  to  say  with  any  definiteness  what  the  regula- 
tions will  be.  Before  the  war  the  following  conditions  and 
re.s:ulations  existed: 

'Handlungsreisende,"  or  commercial  traveler  as  used  in  the 


COMMERCIAL    TRAVELERS  361 

German  "Codified  Trading  Regulations,"  had  a  wider  meaning 
than  in  English.     It  inchided  two  classes  of  travelers: 

1.  Commercial  travelers  proper,  viz.,  travelers  for  com- 

mercial houses  endeavoring  to  secure  contracts  for 
the  sale  of  goods  on  the  strength  of  samples,  etc. 

2.  Ambulant  traders  selling  commodities   from  a  stock 

which  they  carried  with  them. 

From  travelers  of  the  first  class  the  law  required  a  proof 
of  identity  or  permit  and  from  those  of  the  second  class  an 
ambulant  certificate,  hereinafter  called  a  "certificate." 

The  regulations  concerning  permits  were  briefly  as  follows: 
A  traveler  was  required  to  address  an  application  to  the  police 
authorities  at  the  place  of  his  sojourn,  this  application  to  be 
accompanied  by  a  certificate  of  good  conduct  for  the  3  pre- 
ceding years.  Such  certificate  might  be  obtained  from  any  of 
the  municipal  authorities  of  the  town  from  which  the  traveler 
came,  and  was  required  to  be  certified  by  the  German  consul 
and  to  be  a  statement  to  the  effect  that  the  applicant's  reputa- 
tion was  good,  that  he  had  not  been  committed  to  jail,  etc. 
Only  samples  and  patterns  of  merchandise  regarding  which 
the  trip  was  undertaken  could  be  carried.  Travelers  were  not 
as  a  rule  permitted  to  solicit  orders  from  private  individuals. 

The  regulations  concerning  certificates  were  as  follows: 
A  certificate  was  required  if  travelers  without  orders  from  the 
customers  to  be  visited: 

1.  Offered  for  sale  merchandise  which  they  carried. 

2.  Called  for  orders  or  purchased  goods,  with  a  view  to 

selling  them,  from  persons  other  than  merchants  or 
at  places  other  than  places  of  business. 

Application  for  a  certificate  was  made  in  the  same  manner 
as  for  a  permit.  A  certificate  was  good  only  within  the  district 
where  it  was  granted.  A  fee  was  charged  which  varied  accord- 
ing to  the  nature  of  the  enterprise.     (In  Prussia  the  average 


362  TRADE    REGULATIONS 

fee  rate  was  48  marks.)  The  granting  of  a  certificate  was 
dependent  to  a  great  extent  upon  the  discretion  of  the  prefect 
of  pohce.     Certificates  might  be  refused  if  the  appHcant  was: 

1.  Under  25  years  and  had  not  held  a  certificate  during 

the  previous  year. 

2.  A  suspected  person. 

3.  Deaf,  mentally  unsound,  etc. 

4.  A  gipsy. 

Samples  of  no  value  were  admitted  free  of  duty  and  also 
certain  kinds  of  samples  of  value.  Duty  was  required  to  be 
paid  on  all  other  samples  of  value  unless  they  were  duty- 
exempt  by  reason  of  a  commercial  treaty  between  Germany 
and  the  country  of  the  traveler. 

Gibraltar 

See  "British  Possessions  and  Protectorates." 

Gold  Coast 

See  "British  Possessions  and  Protectorates." 

Grenada 

See  "British  Possessions  and  Protectorates." 

Greece 

No  formalities  or  license  of  any  kind  are  required  of  the 
commercial  traveler  in  Greece.  Agents  resident  in  Greece  are 
required  to  take  out  a  trade  license. 

Samples  of  value  are  admitted  upon  deposit  of  security  for 
the  import  duty.  This  deposit  is  refunded  in  case  the  samples 
leave  the  country  within  12  months. 

Guatemala 

No  special  regulations  regarding  commercial  travelers  exist 
and  no  fees  or  taxes  of  any  kind  are  required  of  them.    Neither 


COMMERCIAL    TRAVELERS  363 

do  travelers  who  sell  samples  of  goods  need  any  license,  unless 
they  sell  wines,  spirits,  or  tobacco.  In  these  three  cases  an 
ordinary  license  is  required,  as  in  the  case  of  local  merchants 
selling  similar  commodities. 

Samples  are  liable  to  duty  according  to  the  classification 
given  them  in  the  town  to  which  they  go.  If  they  leave  the 
country,  the  duty  is  refunded.  Samples  imported  by  parcel 
post  are,  without  exception,  admitted  free  of  duty. 

Catalogues  are  liable  to  the  same  duties  imposed  on  other 
printed  matter,  but  the  regulations  are  not  as  a  rule  enforced 
in  connection  with  this  class  of  goods. 

It  Is  advisable  for  travelers  to  be  provided  with  power  of 
attorney  authorizing  them  to  do  business  for  their  firms. 

The  treatment  of  commercial  travelers  from  the  United 
States  Is  now  determined  by  the  treaty  of  December  20,  19 18, 
between  the  United  States  and  Guatemala.  The  provisions  of 
this  treaty  follow  the  same  general  lines  as  do  those  of  the 
treaty  of  October  10,  1918,  with  Uruguay.  The  chief  feature 
of  these  provisions  is  the  replacing  of  the  various  separate 
provincial  taxes  on  commercial  travelers  by  a  single  uniform 
tax  for  the  whole  country.     (See  "Uruguay.") 

Haiti 

A  license  and  patente  are  required  from  all  travelers;  the 
latter  costs  100  and  the  former  50  gourdes.  One  gourde 
(paper)  is  equivalent  to  about  25  cents. 

No  license  Is  required  for  commercial  travelers  from  the 
United  States  or  any  fee,  except  one  of  $4  for  a  passport.  The 
passport  must  be  secured  from  the  Department  of  Interior  in 
case  the  traveler  wishes  to  visit  the  interior  of  the  country. 

Foreigners  are  not  allowed  to  practice  hawking  in  the 
country. 

Samples  of  value  are  admitted  upon  deposit  of  duty.  The 
deposit  is  refunded  when  the  samples  are  re-exported. 


364  TRADE    REGULATIONS 

Hawaii 

Travelers  engaged  in  the  actual  buying  and  selling  of  goods 
or  in  soliciting  orders  on  a  commission  basis  pay  an  annual 
license  fee  of  $100.  The  annual  fee  for  the  license  merely  to 
sell  goods  is  $25.  Special  licenses  are  required  for  persons 
selling  tobacco,  wine,  opium,  etc. 

Import  regulations  regarding  samples  are  the  same  as  in 
the  United  States. 

Honduras 

A  municipal  license,  good  for  90  days  is  required  in  most 
cases.  The  tax  is  usually  about  50  pesos  for  each  visit,  but  in 
Puerto  Cortez  is  only  25  pesos.    A  peso  is  about  50  cents. 

Samples  of  no  value,  but  weighing  more  than  25  pounds, 
are  subject  to  a  small  duty.  Samples  of  commercial  value  are 
admitted  on  compliance  with  certain  formalities  and  upon  the 
deposit  of  duty,  which  is  refunded,  with  a  deduction  of  a  very 
small  fee,  if  samples  are  re-exported  within  90  days. 

There  is  a  duty  on  advertising  matter  based  on  the  gross 
weight  of  the  shipment.  This  duty  in  some  cases  is  quite  high. 
In  order  to  make  it  lower,  advertising  matter  should  be  carried 
in  a  separate  trunk. 

Hong  Kong 

See  "British  Possessions  and  Protectorates." 

Hungary 

The  following  regulations  were  in  force  before  the  war. 
Solicitation    of     orders    by    commercial     travelers     was 
permitted: 

1.  From  tradesmen  who,  in  the  ordinary  course  of  their 

business,  made  use  of  the  articles  offered. 

2.  From  tradesmen  for  office  and  warehouse  fittings  and 


COMMERCIAL    TRAVELERS  365 

requisites;  for  instance,  business  books,  shelves, 
safes,  typewriting  machines,  etc.,  for  the  use  of  the 
tradesman  in  his  business. 

3.  From  farmers  who  within  the  Hmits  of  their  business 

carried  on  some  branch  of  manufacture,  such  as  mill, 
dairy  produce,  etc. 

4.  From  any  person  and  for  any  sort  of  goods  on  receipt 

of  written  invitation  to  call  in  regard  to  certain 
articles. 

5.  From  any  person  for  articles  specified  below: 

(a)  Literary  and  artistic  products. 

(b)  Articles  of  certified  "home"  industry. 

(c)  Instruments  and  scientific  apparatus. 

(d)  Sewing  machines. 

(e)  Larger  agricultural  machines. 

(f)  Plant  for  the  transmission  of  electrical  power. 

The  solicitation  of  orders  by  travelers  in  Hungary  was 
prohibited  in  all  other  cases. 

Reductions  of  railway  fare  were  offered  to  travelers  of 
certain  nationalities. 

Samples  were  admitted  on  deposit  of  security  for  their  full 
market  value  in  addition  to  the  custom  house  duties  and  the 
expenses  of  valuation  and  registration.  The  samples  were 
required  to  be  re-exported  within  a  certain  time,  otherwise  the 
security  was  forfeited. 


CHAPTER   XLII 

COMMERCIAL  TRAVELERS  (Continued) 

India 

No  special  regulations  exist  affecting  commercial  travelers. 
Foreigners  are  prohibited  from  entering  the  state  of  Jammu 
and  Kashmir  and  the  Baghelkhand  State  without  a  pass  from 
the  political  agent  or  the  durbar.  In  the  state  of  Sirohi  all 
travelers  must  take  a  guide  for  the  protection  of  their  lives  and 
property. 

No  general  license  is  required  except  for  the  sale  of  arms, 
ammunition,  liquors,  and  opium.  Municipalities  do  not  usually 
require  licenses  for  commercial  travelers  even  though  they  sell 
their  samples  of  goods.  There  are,  however,  a  few  exceptions 
to  these  general  rules.  Ordinarily,  no  certificates  or  power 
of  attorney  from  the  firms  represented  are  required. 

In  Calcutta  commercial  travelers  who  sell  precious  stones 
are  obliged  to  take  out  a  license  and  pay  a  fee  of  25  rupees. 

In  the  native  state  of  Marwar  a  license  must  be  obtained 
in  order  to  sell  foreign  liquors ;  in  Mauritius,  to  sell  sugar,  etc. 

In  the  Madras  presidency  travelers  must  pay  a  profession 
tax  if  they  exercise  their  calling  within  a  municipality  for  a 
period  of  60  days. 

In  Baroda  commercial  travelers  are  required  to  pay  an  in- 
come tax. 

The  luggage  of  commercial  travelers  is  carried  by  practi- 
cally all  railways  in  India  at  half-parcels  rates,  provided  the 
travelers  represent  reliable  firms.  The  quantity  which  may  be 
carried  by  mail  train  is  limited  to  410  lbs.  and  full  rates  are 
charged. 

366 


COMMERCIAL    TRAVELERS  367' 

Samples  of  commercial  value  whether  brought  personally 
by  commercial  travelers  or  imported  subsequently  by  them  are 
liable  to  import  duty  at  the  rates  specified  in  the  tariff.  De- 
posit or  bond  is  required,  but  is  refunded  if  the  samples  are 
later  taken  out  of  the  country  again.  Re-exportation  must  take 
place  within  12  months  if  duty  is  to  be  refunded. 

Indo-China 

No  regulations  for  commercial  travelers  exist. 

Italy 

No  certificates  of  identity  or  licenses  are  required  except 
in  the  case  of  travelers  from  countries  which  have  adopted  re- 
strictive measures  against  Italian  commercial  travelers. 

Samples  of  no  commercial  value  are  admitted  free  of  duty, 
but  the  admission  of  those  of  commercial  value  is  regulated 
according  to  the  agreement  between  Italy  and  the  country  from 
which  the  traveler  comes.  Usually  security  must  be  deposited 
when  such  samples  are  imported;  this  payment  is  refunded  in 
case  they  leave  the  country  within  a  period  of  12  months.  On 
importing  the  samples,  the  traveler  must  obtain  a  permit  from 
the  Italian  authorities  giving  particulars  concerning  the 
samples,  the  duty  to  be  levied,  etc. 

Jamaica 

See  "British  Possessions  and  Protectorates." 

Japan 

Regulations  affecting  commercial  travelers  in  Japan  show 
that  in  some  cases  it  is  necessary  for  them  to  obtain  licenses. 
It  depends  largely  upon  the  nature  of  the  goods,  as  the  fee  is 
levied  according  to  the  class  of  goods  to  be  sold.  A  commercial 
traveler  who  carries  with  him  or  sells  samples  of  goods  must 
obtain  a  license  and  also  permission  to  do  business. 


368 


TRADE    REGULATIONS 


Articles  temporarily  imported  as  samples  are  not  subject 
to  import  duty  provided  they  are  re-exported  within  6  months 
and  provided  security  equal  to  the  amount  of  the  duty  leviable 
is  furnished  at  the  time  of  importation. 

The  details  regarding  rail  transportation  may  be  found 
among  the  regulations  available  at  the  Department  of  Com- 


merce 


Liberia 

There  are  usually  no  state  taxes  levied  in  Liberia,  but  mu- 
nicipal authorities  often  require  a  traveler  to  take  out  an 
agent's  license  costing  about  $26.50  per  annum.  Those  trav- 
elers who  sell  samples  may  be  required  to  take  out  a  wholesale 
trade  license,  the  cost  of  which  is  also  about  $26.50  per  annum. 
If  the  goods  are  sold  retail,  the  cost  of  a  license  is  about  $17 
per  annum. 

Municipal  licenses  are  valid  only  for  the  town  in  which 
they  are  issued.  Travelers  proposing  to  stay  a  short  time  may 
make  arrangements  for  a  quarterly  license  at  a  proportionate 
rate. 

Samples  of  no  value  are  not  subject  to  duty.  Samples  of 
commercial  value  are  subject  to  an  import  duty  which  may 
be  refunded  in  case  of  re-exportation.  There  are,  however, 
no  special  regulations  in  regard  to  this  matter. 

It  is  advisable  in  all  cases  for  travelers  to  carry  power  of 
attorney  from  their  principals.  Certificates  from  their  firms 
authorizing  them  to  collect  debts  are  also  desirable  if  such 
work  is  to  form  a  part  of  their  duties. 

Madagascar 

Travelers  are  required  to  pay  a  tax  of  about  $3  per  month. 

Malta 

See  "British  Possessions  and  Protectorates." 


COMMERCIAL    TRAVELERS  369 

Mauritius 

See  "British  Possessions  and  Protectorates." 

Mexico 

The  regulations  pertaining  to  commercial  travelers  in 
Mexico  are  very  numerous,  cumbersome,  and  complicated,  so 
that  they  fill  a  good-sized  pamphlet.  Consequently  the  sub- 
ject can  be  treated  here  only  very  briefly.  The  reason  for  these 
compHcated  regulations  is  that  there  are  in  Mexico  27  states, 
each  of  which  individually  regulates  commercial  travelers,  as 
do  also  some  of  the  municipalities.  As  a  result  a  tax  is  levied 
by  both  the  states  and  the  cities.  Besides,  these  taxes  are  sub- 
ject to  the  federal  provision  which  requires  that  20  per  cent 
be  added  to  all  taxation  for  the  benefit  of  the  federal  govern- 
ment. The  latter  tax  is  levied  in  the  form  of  stamps  affixed 
to  the  receipt  for  payment  of  state  or  municipal  licenses,  and 
amounts  to  20  per  cent  of  the  actual  rate  of  assessment. 

Duty  is  levied  on  samples  according  to  the  class  of  goods 
to  which  they  belong.  Certain  kinds  of  samples  are  admitted 
free.  In  other  cases  a  deposit  of  the  amount  of  the  duties  pay- 
able on  the  goods  is  required.  If  the  goods  are  re-exported 
within  the  time  provided  by  law  such  duty  is  refunded.  The 
period  during  which  re-exportation  should  take  place  in  order 
to  derive  the  benefit  of  a  refund  is  not  supposed  to  exceed  6 
months,  although  it  may  be  extended  to  2  years  by  the  Central 
Customs  Administration. 

There  is  a  duty  on  catalogues  and  on  advertisements  in  the 
form  of  pamphlets  if  they  are  bound,  as  they  are  then  classified 
under  Article  602  of  the  Customs  Tariff  and  the  rate  of  5 
centavos  per  kilogram  gross  weight  is  charged.  Catalogues 
and  advertisements,  if  unbound,  are  admitted  free.  Adver- 
tisements of  all  kinds  on  paper  or  cardboard,  if  unframed,  pay 
a  duty  of  22  centavos  per  kilogram. 

The  following  table,  showing  the  payments  to  be  made 


370 


TRADE    REGULATIONS 


by  commercial  travelers  in  the  municipalities  of  the  state  of 
Coahuila,  will  illustrate  the  difficulties  and  complications  await- 
ing the  traveler  in  Mexico. 

State  of  Coahuila 


Name  of 
Municipality 

Agents'  Tax  Lev 

lED  On 

Observations* 

AUende 

Commercial 

travelers. 

$3  to  $5  on  each 
journey. 

Sewing  machine  agent-. 

$3  to  $10  per 
month. 

Insurance  agents. 

. 

$3  to  $5  per 
month. 

General  Zepeda 

Commercial 

travelers. 

$5  to  $10  per 
month. 

Gigedo 

No    agents' 

tax   exists. 

Guerrero 

No    agents' 

tax    exists. 

Hidalgo' 

Sewing  machine  agents. 

$1  per  month. 

Commercial 

travelers. 

2%  on  value  of 
sales. 

Jimenez 

No    agents' 

tax    exists. 

Juarez 

Commercial 

and  other  travelers. 

$5  on  each  visit; 
$5  ,to  $100  per 
month. 

Matamoros 

Commercial 

travelers. 

$5  to  $io  per  visit. 

Monclova 

Commercial 

travelers. 

$2  to  $io  per 
month. 

Muzquiz 

Commercial 

travelers. 

$8  to  $25  on  each 
transaction. 

Nadadores 

Commercial 

travelers. 

$1   to  $3  per  da3^ 

Nava 

Commercial 

travelers. 

$3   per  month. 

Parras 

Insurance    agents    and 
agents. 

clothing    club 

$5  to  $10  per 
month. 

Porfirio   Diaz 

Native  and 
elers. 

foreign  commercial  trav- 

$5  to  $io  for  each 
journey. 

$  represents  Mexican   money. 


COMMERCIAL    TRAVELERS 
State  of  Coahuila  (Continued) 


3/1 


Name  of 
Municipality 


Porfirio  Diaz 
(Cont.) 


Progreso 
Ram^s  Ari::pe 
Sabinas 


Sacramento 
Saltillo 


Agents'  Tax  Levied  On 


San  Buenaven- 
tura 


San  Pedro 


Sierra   Mojada 


Book  and  paper  agents. 
Agents  established  in  the  town. 
Insurance  agents. 

Sewing  machine  agents. 

No   agents'    tax    exists. 
Commercial  travelers. 
Insurance    agents. 

Commercial  travelers. 

Commercial  travelers. 

Travelers  who  bring  their  goods 
with  them  and  effect  sales  in 
jewelry,  textiles,  or  other  unspeci- 
fied wares. 

Agents  for  india  rubber  stamps  or 
office  requisites. 

Sewing  machine  agents. 

Insurance  agents. 
Lottery  agents. 

Sewing  machine  agents. 
Commercial  travelers. 
Insurance  agents. 

Commercial  travelers. 


No   agents'    tax    exists. 


Observations* 


$3    per    month. 

$10   per   month. 

$5     to     $io     per 
journey. 

$10  per  month. 


$1  to  $5  per  diem. 

$3     to     $5     per 
month. 

$4     to     $5      per 
month. 

1%   on    sales. 

$50     to    $500    per 
month. 


$2     to     $5      per 
month. 

$30     to     $40     per 
month. 

$10  per  month. 

$2     to     $5     per 
month. 


$1  to  $3  per  day. 
$2  to  $5  per  day. 
$2  per  day. 

From  $2  to  $20 
and  from  $20  to 
$100  per  month 
on  sale. 


$  represents  Mexican  money. 


572 


TRADE    REGULATIONS 


State  of  Coahuila  (Continued) 


Name  of 
Municipality 


Torreon 

Viesca 
Zaragoza 


Agents'  Tax  Levied  On 


Commercial   travelers. 


Machinery   agents,    commercial   trav- 
elers,  and   insurance   agents. 

Commercial  travelers. 


Observations* 


$5  to  $50  per 
month  accord- 
ing to  the  arti- 
cle   for   sale. 


From  $3  upw^ards. 
$2  to  $10  per  visit. 


$  represents   Mexican   money. 


Taxes  in  the  other  states  of  Mexico  vary  from  $5  to  $100 
per  month  (Mexican  money).  It  is  understood,  of  course,  that 
as  a  commercial  traveler  goes  from  one  state  into  another, 
he  has  to  pay  a  tax  in  each  state  in  which  he  transacts  business. 
Otherwise  he  incurs  a  fine  which  ranges  from  $25  to  $100  for 
each  violation.  A  Mexican  dollar  is  worth  about  50  cents  in 
United  States  money. 

As  the  conditions  and  laws  are  at  present  uncertain  and 
questionable  in  Mexico,  it  is  advisable  that  current  informa- 
tion be  sought  from  the  Department  of  Commerce. 

Montenegro 

No  special  regulations  existed  before  the  war  regarding 
commercial  travelers.  They  were  required,  however,  to  pro- 
duce power  of  attorney  or  certificates  showing  that  they  were 
authorized  to  conduct  business  on  their  employers'  behalf. 

Samples  of  commercial  value  were  dutiable.  The  duty  was 
refunded  at  any  time  they  were  re-exported.  At  the  present 
time  the  status  of  regulations  in  Montenegro  is  uncertain. 

Montserrat 

See  "British  Possessions  and  Protectorates." 


COMMERCIAL    TRAVELERS  373 

Morocco 

No  regulations  of  any  kind  exist  concerning  commercial 
travelers  and  no  restrictions  are  imposed  upon  them. 

All  samples  are  admitted  free  of  duty,  provided  they  are 
re-exported  within  6  months.  Re-exportation  must  take  place 
through  the  custom  house  at  which  the  entry  of  the  goods  was 
effected. 

Netherlands 

Strictly  speaking,  no  licenses  are  required.  The  only  tax 
to  which  travelers  are  liable,  provided  they  are  not  domiciled 
in  the  country,  is  on  their  professional  income.  The  amount 
of  such  tax  is  fixed  at  15  guilders  a  year  (about  $6).  Trav- 
elers are  compelled  to  send  in  their  name,  their  domicile,  and 
a  statement  of  the  nature  of  their  business  to  the  municipal 
authorities,  who  then  issue  to  them  free  of  charge  a  certificate 
permitting  them  to  do  business.  Unless  this  certificate  is  pro- 
duced on  the  demand  of  the  officials  who  are  charged  with 
levying  a  tax  on  professional  incomes,  travelers  are  liable  to 
a  penalty  of  25  guilders  (about  $10.50). 

Samples  of  no  commercial  value  are  admitted  free  of  duty. 
All  samples  of  value  must  be  presented  for  marking  and  iden- 
tification and  their  admission  is  regulated  by  the  customs  offi- 
cials. After  the  value  of  the  samples  has  been  declared,  a  tran- 
sit passport  is  used.  Security  for  payment  of  duty  must  be 
given  at  this  time.  This  security  is  refunded  when  the  goods 
are  re-exported.  Gold  and  silver  articles  imported  as  samples 
are  subject  to  special  regulations. 

Newfoundland 

No  special  regulations  exist  concerning  commercial  trav- 
elers, and  no  licenses  are  required.  Railroads  grant  no  special 
privileges.  Samples  of  commercial  value  are  subject  to  duty, 
which  is  refunded  if  articles  are  re-exported  within  6  months. 


374 


TRADE     REGULATIONS 


New  Zealand 

Commercial  travelers  in  New  Zealand  who  sell  their  sam- 
ples or  make  sales  of  goods  must  procure  annual  licenses. 
They  are  also  required,  on  their  arrival,  to  make  a  deposit  of 
£io  (about  $50)  as  a  guarantee  that  the  income  tax  on  business 
done  in  the  colony  will  be  paid.  This  deposit  is  held  until  the 
traveler  furnishes  a  report  of  the  total  business  transacted  dur- 
ing his  visit.  When  the  adjustment  of  taxes  is  made  a  refund 
is  granted  if  the  deposit  amounts  to  more  than  the  tax.  Prin- 
cipals of  firms  who  travel  to  take  orders  or  to  visit  customers 
are  subject  to  the  same  provisions  as  are  other  commercial 
travelers. 

A  deposit  is  required  on  all  samples  of  value  entering  the 
country  but  is  refunded  if  the  samples  are  re-exported  within 
6  months.  No  certificates  or  power  of  attorney  are  necessary 
unless  the  traveler  is  brought  in  contact  with  legal  proceedings. 
It  is  advisable,  nevertheless,  to  carry  such  documents. 

In  New  Zealand,  railways  allow  commercial  travelers  to 
carry  112  lbs.  of  luggage  and  samples  free  of  charge.  The 
excess  over  that  amount  up  to  10  cwt.  is  charged  at  the  rate 
of  6d.  for  every  56  lbs.  or  fraction  thereof  for  every  50  miles 
or  fraction  thereof.    This  is  half  the  rate  charged  the  public. 

Nicaragua 

No  special  regulations  concerning  commercial  travelers 
exist  and  travelers  are  permitted  to  sell  without  license  the 
samples  and  goods  they  carry. 

Only  samples  of  value  are  liable  to  duty.  This  duty  is 
refunded  if  the  traveler  at  the  time  of  importation  makes  a 
declaration  of  his  intention  to  re-export  the  articles.  They 
must  be  re-exported  from  the  port  of  entry  within  2  months 
if  advantage  of  this  privilege  is  to  be  taken.  Arrangements 
can,  however,  be  made  for  the  prolongation  of  this  period. 

Circulars,  cards,  pamphlets,  and  catalogues  are  admitted 


COMMElRClAi:    TRAVELERS  375 

free  of  duty,  but  calendars,  even  when  printed  for  compli- 
mentary distribution,  are  dutiable  at  a  rate  of  a  little  over  12 
cents  a  pound. 

North  Borneo 

See  "British  Possessions  and  Protectorates." 

Northern  Nigeria 

See  "British  Possessions  and  Protectorates." 

Norway 

A  trading  license  is  required  and  must  be  obtained  imme- 
diately upon  the  arrival  of  the  traveler  in  Norway.  The  charge 
for  this  license,  which  is  good  for  only  i  month,  is  100  kroner 
(about  $27).  The  license  may  be  obtained  from  the  nearest 
police  authority. 

Commercial  travelers  visiting  customers  who  are  local 
agents  must  also  take  out  a  trading  license.  A  traveler  will- 
ing to  do  business  must,  on  arriving  in  a  new  town,  submit  his 
license  for  certification  to  the  director  of  police.  For  this 
certification  no  charge  is  made. 

It  is  illegal  for  a  foreign  traveler  to  offer  goods  for  sale 
to  private  customers  in  Norway.  He  may,  however,  sell  his 
samples  direct  from  the  ship  or  carriage  in  which  they  are 
imported,  but  such  sales  may  be  made  only  to  Norwegian 
merchants  or  tradespeople  for  retail  trade,  or  to  those  desiring 
the  implements  or  raw  materials  for  use  in  their  business. 

On  certain  conditions  drawback  is  granted  of  duty  paid  on 
samples  of  commercial  value,  if  they  are  re-exported  in  the 
same  condition  as  imported,  and  if  notice  has  been  given  of 
their  importation.  Samples  may  be  re-exported  from  any 
port.  No  regulations  exist  as  to  the  time  in  which  re-exporting 
must  take  place. 

There  is  a  duty  on  all  catalogues  of  25  ore  per  kilogram 


276  TRADE    REGULATIONS 

(about  $.067),  but  there  are  no  customs  regulations  specially 
affecting  catalogues  brought  in  by  commercial  travelers. 

Nyasaland  Protectorate 

See  "British  Possessions  and  Protectorates." 

Panama 

Upon  payment  of  a  municipal  tax  of  $10  per  month,  trav- 
elers are  permitted  to  take  orders  with  or  without  samples. 
The  license  must  be  renewed  each  month  if  the  traveler 
continues  business.  A  separate  license  is  required  for  each 
municipal  district  visited  for  the  purpose  of  taking  new  orders, 
but  no  charge  is  made  if  travelers  visit  only  their  former  cus- 
tomers or  come  only  to  collect  debts. 

Samples  of  value  must  be  declared  to  the  Treasury  Office 
on  their  arrival  at  the  port  of  debarkation.  A  landing  permit 
will  then  be  issued.  Ten  per  cent  of  the  invoice  value  must  be 
deposited  on  all  such  samples,  and  it  is  desirable  that  the  bond 
should  be  certified  by  the  consul  for  payment  in  the  country 
from  which  the  traveler  comes.  This  bond  is  returned  on 
the  presentation  of  a  custom  house  certificate  which  states  that 
none  of  the  samples  have  been  sold  by  the  salesman  during  his 
stay  in  the  republic. 

Panama  Canal  Zone 

There  are  no  restrictions  placed  upon  the  activities  of  com- 
mercial travelers  in  the  Canal  Zone  provided  they  merely  take 
orders  from  samples,  but  if  they  desire  to  sell  the  samples  they 
must  obtain  a  pedler's  license,  costing  $2  for  each  month  or 
part  of  a  month  during  which  the  goods  are  offered  for  sale. 

Paraguay 

All  travelers  are  required  to  take  out  a  license  before  they 
may  sell  goods,  the  cost  varying  according  to  the  importance 


COMMERCIAL    TRAVELERS 


377 


of  the  firm,  which  is  decided  by  a  board  of  local  merchants. 
The  following  are  the  fees  which  must  be  paid  at  Asuncion, 
Villa  Rica,  Encarnacian,  Concepcion,  and  Villa  del  Pillar: 

1st  class — $5,500  paper,  per  half-year  (about  $341  American  money) 
2nd      "         4,000       "         "       "      '  " 
3rd      "         2,500       "         "       " 
4th      "         1,800       "         "       " 
5th      "         1,200       "         "       " 

Principals  and  commercial  travelers  of  firms  represented 
by  an  agent  or  business  house  of  Paraguay  may  carry  on  their 
business  without  taking  out  a  license.  The  license  fees  are 
usually  avoided  by  travelers  by  forming  a  connection  with  a 
local  agent  who  has  an  importer's  license.  This  local  agent 
either  accompanies  the  traveler  on  his  trips  through  Paraguay 
or  sends  an  employee  to  do  so.  Such  an  arrangement  may  be 
made  with  almost  any  local  firm  licensed  as  an  importer.  For 
this  service  the  local  firm  usually  receives  a  small  percentage 
of  the  profit  on  the  sales  made. 

Samples  of  commercial  value  are  admitted  on  a  deposit 
which  is  refunded  if  re-exportation  takes  place  within  6 
months.     There  is  no  duty  on  advertising  matter. 

Persia 

There  are  no  regulations  concerning  travelers  and  conse- 
quently no  license  is  required  nor  is  any  tax  levied.  On  the 
other  hand  a  passport  properly  authorized  by  the  official  repre- 
sentative of  the  Persian  government  in  the  country  from  which 
the  traveler  comes  is  absolutely  necessary.  Samples  of  piece 
goods  of  not  more  than  30  centimetres  in  length  are  admitted 
free.     The  importation  of  firearms  is  prohibited. 

Peru 

There  are  no  special  regulations  affecting  commercial  trav- 
elers.    The  admission  of  travelers'   samples  is  governed  by 


378  TRADE    REGULATIONS 

the  law  of  June  26,  19 12,  and  a  considerable  number  of  for- 
malities are  to  be  observed.  Among  these  are  the  presentation 
of  an  inventory  containing  particulars  regarding  weight,  mark, 
tariff  classification,  individual  numbering  of  each  article,  etc. 
Generally  speaking,  however,  samples  of  any  kind,  the  entry  of 
which  is  not  prohibited  by  the  custom  laws,  are  admitted  on 
the  deposit  of  security  which  is  refunded  if  they  are  taken  out 
of  the  country  within  a  certain  period  of  time.  It  is  often  the 
custom  of  travelers  visiting  Peru  to  place  their  trunks  of  sam- 
ples in  the  hands  of  a  customs  broker,  who  furnishes  a  personal 
bond  for  the  customs  duty  on  samples  and  attends  to  other 
formalities.  Samples  of  no  commercial  value  are  admitted 
free,  though  such  admittance  is  at  the  discretion  of  the 
appraiser. 

It  is  advisable  in  all  cases  for  the  traveler  to  carry  with  him 
power  of  attorney  from  his  firm,  a  letter  from  the  chamber 
of  commerce  of  the  city  in  which  his  firm  is  located,  and  at 
least  one  letter  of  recommendation  to  some  local  merchant  in 
the  port  at  which  he  enters. 

The  Arequipa  municipality  compels  commercial  travelers 
to  take  out  a  license  the  cost  of  which  is  about  $12.50  per 
quarter. 

There  is  a  tax  of  50  soles  (about  $24)  per  visit  in  Cuzco 
also.     A  limited  amount  of  advertising  is  admitted  free. 

Philippine  Islands 

There  are  no  regulations  affecting  travelers  unless  they 
constitute  themselves  merchants,  in  which  case  they  are  liable 
to  the  percentage  tax  of  one-third  of  i  per  cent  upon  the 
amount  received. 

Poland 

No  special  regulations  concerning  foreign  travelers  exist 
in  Poland  at  this  time,  but  inquiry  should  be  made  at  the 


COMMERCIAL    TRAVELERS  379 

Department  of  Commerce  by  those  expecting  to  send  a  repre- 
sentative into  that  country. 

Portugal 

There  are  no  rules  or  regulations  concerning  travelers. 
Should  the  traveler,  however,  for  the  purpose  of  his  business 
occupy  land  or  expose  for  sale  goods  subject  to  taxes  accord- 
ing to  the  municipal  or  local  tariff,  he  may  be  called  upon  to 
pay  municipal  imposts  which  vary  in  different  cities.  Trav- 
elers are  subject,  moreover,  to  a  local  industrial  tax  which 
is  assessed  according  to  local  classification,  a  duty  rate  vary- 
ing from  $5  to  $28  being  levied  in  various  towns. 

Portuguese  railway  systems  have  season  tickets  and  kilo- 
meter passes  of  which  travelers  may  avail  themselves  in  secur- 
ing a  special  rate. 

The  importation  of  samples  is  permitted  upon  deposit  of 
duty,  which  can  be  recovered  if  the  samples  are  re-exported 
within  I  year. 

Rhodesia 

See  "British  Possessions  and  Protectorates." 

Roumania 

Foreign  travelers  are  not  subject  to  tax,  but  must  exhibit, 
besides  their  passport,  a  certificate  of  legitimation. 

Principals  of  firms  who  travel  to  take  orders  are  subject 
to  the  same  regulations  as  are  ordinary  commercial  travelers. 
If  one  man  represents  more  than  one  firm,  the  names  of  all 
firms  represented  must  be  specified  on  the  certificate. 

Travelers  are  subject  to  penalty  if  they  sell  any  samples  of 
goods  they  carry.  If  samples  of  commercial  value  are  re- 
exported within  12  months  no  duty  is  charged,  but  a  bond  must 
be  filed  or  security  deposited  when  the  application  for  entry 
is  made. 


380  TRADE    REGULATIONS 

Foreigners  who  intend  to  remain  more  than  8  days  must 
procure  permits  from  the  prefect  of  the  district  within  24  hours 
after  arriving  in  the  country. 

Russia 

Owing  to  unsettled  conditions  at  this  writing,  there  is 
no  certainty  regarding  the  regulations  for  commercial  travelers 
in  Russia.  Previous  to  the  revolution,  commercial  travelers 
arriving  in  Russia  had  to  obtain  a  personal  license  at  the  cost 
of  about  $26  and  a  trading  license  for  the  firms  they  repre- 
sented at  a  further  cost  of  about  $50.  In  addition,  provincial 
duties  at  the  rate  of  10  and  15  per  cent  were  charged  and  town 
duties  of  the  same  amount,  varying  according  to  locality.  A 
great  many  formalities  were  required  before  one  could  obtain 
a  license  to  trade.  Further  information  may  be  obtained  from 
the  Department  of  Commerce. 

St.  Helena 

See  "British  Possessions  and  Protectorates." 

St.  Lucia 

See  "British  Possessions  and  Protectorates." 

St.  Vincent 

See  "British  Possessions  and  Protectorates," 

Salvador 

No  special  regulations  exist  regarding  travelers  who  merely 
canvass  for  orders.  Those  who  carry  samples  for  sale  to 
wholesale  merchants  pay  a  tax  when  entering  the  republic  of 
100  pesos  (about  $40),  if  their  stay  is  not  to  exceed  2  months. 
For  every  month  over  this  period  they  will  be  charged  about 
$10  extra,  the  amount  being  collected  by  the  administrator  of 
customs  at  the  time. of  their  departure. 


COMMERCIAL    TRAVELERS  381 

Municipalities  levy  also  a  local  tax  on  commercial  travelers. 
This  tax  in  San  Salvador,  for  instance,  is  50  pesos,  but  an 
additional  tax  of  $20  is  levied  on  all  representatives  of  for- 
eign houses.  Other  municipalities  levy  taxes,  valid  for  i  year, 
of  10  pesos  or  less. 

It  is  advisable  in  all  cases  for  the  traveler  to  carry  letters 
from  the  firms  for  which  he  is  doing  business. 

All  samples,  whether  of  commercial  value  or  not,  are  liable 
to  duty.  If  the  goods  are  intended  for  re-exportation  the 
duties  may  be  deposited  with  a  view  to  their  return  when  the 
traveler  leaves  the  country. 

Advertising  matter,  including  chromos  and  almanacs,  is 
dutiable  at  about  $1.50  per  100  lbs. 

Santo  Domingo 

There  are  no  regulations  concerning  travelers  and  no  for- 
mality need  be  complied  with  except,  perhaps,  that  which 
makes  commercial  travelers  who  dispose  of  their  goods  liable 
to  a  tax  of  about  $53  in  each  center  in  which  they  do  business, 
and  to  a  tax  of  about  $10  in  each  locality  in  which  a  sale  is 
made  if  they  dispose  of  samples.  This  law,  however,  is  rarely, 
if  ever,  enforced. 

Samples  to  a  value  not  exceeding  $2,000,  introduced  by 
travelers  for  use  in  their  business,  may  be  admitted  temporarily 
free  of  duty  provided  they  do  not  remain  in  the  country  more 
than  4  months  and  provided  the  importer  gives  satisfactory 
security. 

Seychelles 

See  "British  Possessions  and  Protectorates." 

Siam 

No  special  regulations  exist  affecting  commercial  travelers, 
and  no  duties  are  levied  on  samples  except  on  those  of  commer- 


382  TRADE    REGULATIONS 

cial  value.  Such  samples  are  dutiable  as  ordinary  goods.  The 
duty  is  refunded  if  re-exportation  takes  place  within  6  months. 
A  list  of  the  samples  must  be  given  to  the  custom  house. 

Sierra  Leone 

See  "British  Possessions  and  Protectorates." 

Southern  Nigeria 

See  "British  Possessions  and  Protectorates." 

Spain 

The  treatment  accorded  travelers  from  foreign  countries 
is  regulated  in  Spain  partly  by  the  Spanish  Industrial  Contribu- 
tions Law  of  1896  and  partly  by  the  Hispano-Swiss  Commer- 
cial Treaty  of  1906  and  other  commercial  treaties. 

Travelers  who  possess  no  fixed  residence  in  Spain,  who 
neither  sell  their  samples  nor  take  orders  from  private  individ- 
uals, and  who  confine  themselves  to  taking  orders  from  com- 
mercial houses  are  entirely  exempt  from  taxation. 

Those  with  fixed  residence,  such  as  managers  of  branch 
houses,  and  those  who  merely  sell  from  samples  or  catalogues, 
have  to  pay  a  tax  of  from  164  to  300  pesetas.  The  tax  varies 
according  to  the  city  in  which  the  business  is  transacted.  Trav- 
elers who  sell  the  samples  brought  with  them  or  who  take 
orders  by  means  of  those  samples  from  private  individuals  are 
subject  to  a  tax  of  2,000  pesetas. 

There  are  special  regulations  concerning  the  sale  of  jewelry. 

According  to  the  Finance  Act  passed  in  December,  1910, 
heavy  additional  taxes  were  established.  The  schedule  of  these 
taxes  may  be  secured  from  the  Spanish  consulate  or  from  the 
United  States  Department  of  Commerce. 

Samples  of  commercial  value  are  admitted  free  on  declara- 
tion of  the  maximum  period  during  which  they  are  to  remain 
in  the  country. 


COMMERCIAL    TRAVELERS  383 

A  document  of  identification  is  necessary  for  all  commercial 
travelers.  It  may  be  said  in  general  that  the  Spanish  regula- 
tions are  very  complicated,  so  that  it  is  advisable  for  the 
merchant  contemplating  trade  activities  in  this  field  to  obtain 
detailed  information  from  the  Spanish  consulate  or  embassy 
in  this  country. 

Straits  Settlements 

See  "British  Possessions  and  Protectorates." 

Sudan,  Anglo-Egyptian 

See  "British  Possessions  and  Protectorates." 

Surinam 

No  license  is  required  except  for  those  travelers  dealing 
in  spirits.  Such  dealers  must  pay  the  same  tax  that  is  levied  on 
the  local  traders  in  such  articles.  Samples  other  than  those 
of  no  commercial  value  are  inspected  by  the  customs  officials. 
At  the  time  of  this  inspection  security  must  be  given  for  the 
payment  of  import  duties.  The  security  is  refunded  if  the 
articles  are  re-exported. 

Sweden 

All  commercial  travelers  must  obtain  a  license,  the  cost 
of  which  is  100  kronor  (about  $27).  This  license  is  good  for 
30  days  only  and  an  additional  50  kronor  (about  $13.40)  is 
charged  for  every  15  days  over  the  first  30  days.  This  license 
entitles  the  traveler  to  sell  goods  in  any  part  of  the  country. 
He  may  not,  however,  sell  any  of  his  samples. 

The  principal  of  a  firm,  traveling  to  take  orders  or  to  visit  his 
customers,  is  required  to  take  out  a  license  in  the  same  way 
as  any  other  commercial  traveler. 

Samples  of  value  are  liable  to  the  ordinary  rates  of  duty. 
The  duty  paid  may  be  recovered,  however,  if  the  samples  are 


384  TRADE    REGULATIONS 

re-exported  within  6  months.  This  period  may  be  extended 
by  special  arrangement  with  the  authorities  for  3  additional 
months. 

It  is  well  for  a  traveler  to  carry  documents  while  traveling 
in  Sweden. 

Switzerland 

A  license  called  "carte  de  legitimation"  must  be  obtained 
by  commercial  travelers  before  they  are  permitted  to  do  busi- 
ness in  Switzerland.  This  license  is  issued  free  of  charge  and 
applies  only  to  the  dealings  of  commercial  travelers  with  firms. 
In  case  travelers  deal  with  private  individuals  they  are  re- 
quired to  obtain  another  license,  good  for  6  months,  for  which 
a  charge  of  100  francs  (about  $20)  is  made.  The  cost  of  an 
annual  license  is  150  francs.  To  obtain  a  license  a  traveler 
must  produce  a  certificate  of  identity  issued  by  a  chamber  of 
commerce  or  other  competent  authority,  stating  that  the  firm 
for  which  he  is  acting  is  authorized  to  do  business  in  his  own 
country. 

There  are  no  other  taxes.  Sometimes  permission  can  be 
obtained  to  carry  merchandise  for  sale  as  distinct  from  sam- 
ples. Application  for  such  permission  should  be  made  to  the 
government  of  the  canton  which  the  traveler  proposes  to  visit. 
He  must,  however,  first  obtain  federal  assent  from  the  De- 
partment of  Commerce  at  Berne. 

As  regards  customs  duties,  different  countries  are  differ- 
ently treated  according  to  the  decisions  of  the  Franco-Swiss 
Convention  of  October  26,  1906.  The  status  of  the  United 
States  in  this  regard  may  be  ascertained  from  the  Depart- 
ment of  Commerce.  As  a  general  rule,  however,  it  may  be 
said  that  samples  of  commercial  value  are  admitted  on  deposit 
of  security  as  in  many  other  countries,  and  that  this  deposit 
Is  refunded  in  case  the  samples  are  taken  out  of  the  country 
within  I  year. 


COMMERCIAL    TRAVELERS  385 

Trinidad 

See  "British  Possessions  and  Protectorates." 

Tunis 

No  regulations  exist  affecting  commercial  travelers.  A 
firm  proposing  to  do  business  with  a  traveler  might,  neverthe- 
less, require  some  evidence  of  authority  from  him  provino; 
that  he  really  represents  the  firm  whose  emissary  he  claims 
to  be. 

A  deposit  of  duty  must  be  made  on  samples  of  retail  value. 
This  deposit  is  refunded  if  the  samples  are  re-exported  within 
6  months. 

Turkey 

The  latest  regulations  concerning  trade  relations  between 
this  country  and  Turkey  can  best  be  obtained  from  the  Depart- 
ments of  State  and  Commerce. 

Before  the  war  no  regulations  existed  affecting  commer- 
cial travelers.  No  special  licenses  were  required  even  though 
the  traveler  sold  the  samples  he  carried.  He  was  invariably 
obliged,  however,  to  carry  passports  duly  registered  by  the 
Turkish  consul. 

Samples  of  value  were  admitted  upon  a  casli  deposit  of 
the  customs  duty  or  upon  the  deposit  of  a  bond.  If  the  sam- 
ples were  re-exported  within  6  months,  the  customs  office  at 
the  port  of  exportation  refunded  the  whole  amount  deposited, 
provided  the  traveler  presented  the  receipt  furnished  him  at 
the  time  of  importation  as  well  as  a  copy  of  the  declaration 
made  by  him  at  that  time.  These  regulations  varied  according 
to  the  commercial  treaty  between  Turkey  and  the  homeland 
of  the  traveler. 

Uganda 

See  "British  Possessions  and  Protectorates." 


386  TRADE    REGULATIONS 

Union  of  South  Africa 

Generally  speaking,  a  license  is  required.  In  Cape  Colony 
a  license  costs  £50  per  annum  or  £25  per  half-year,  if  but  one 
firm  is  represented.  If  more  than  one  firm  is  represented,  £5  or 
£2  los.  is  charged  for  every  additional  firm  up  to  a  maximum 
charge  of  £100  or  £50  respectively.  Half-yearly  licenses  can 
be  taken  out  only  after  June  30  and  all  licenses  expire  on  De- 
cember 31.  The  same  rule  applies  to  agents  and  representatives 
of  foreign  firms. 

Under  ordinary  circumstances  duty  Is  levied  on  all  samples 
of  value  imported  by  travelers.  If  re-exportation  takes  place 
within  the  year  the  duty  is  refunded.  Travelers  wishing  to  re- 
move their  samples  from  one  colony  to  another  within  the 
union  must  obtain  a  permit  from  the  customs  authorities. 

In  Natal  there  is  a  stamp  tax  amounting  to  £10  per  year. 
All  licenses  expire  December  31,  but  if  taken  after  June  30  only 
£6  is  charged.  One  license  is  sufficient  for  the  traveler  regard- 
less of  the  number  of  firms  which  he  represents.  Principals  of 
firms  who  travel  only  to  visit  customers  are  not  required  to  take 
out  a  license.  Travelers  are  subject  to  an  income  tax  on  all 
income  earned  in  Natal. 

In  Orange  Free  State  £5  is  charged  for  a  license  which  is 
valid  for  only  3  months.  The  license  to  sell  liquor  costs  £20 
for  3  months.  All  licenses  are  personal.  Travelers  selling 
samples  require  In  addition  a  general  dealer's  license  or  a 
hawker's  license,  according  to  whether  the  goods  are  sold  at 
the  premises  of  the  customer  or  of  the  agent.  Principals  visit- 
ing customers  do  not  need  a  license.  No  income  tax  is  levied 
on  commercial  travelers  in  Orange  Free  State. 

In  Transvaal  all  commercial  travelers  must  take  out  a 
license  at  a  cost  of  £10  yearly  or  £6  half-yearly;  all  licenses 
expire  December  31.  No  income  tax  is  levied  In  Transvaal. 
The  principal  of  a  firm  taking  orders  must  take  out  a  license 
as  in  the  case  of  the  ordinary  traveler. 


COMMERCIAL    TRAVELERS  387 

On  the  lines  of  the  South  African  government  railways 
commercial  travelers  are  allowed  to  carry  double  the  weight  of 
free  luggage  permitted  in  the  case  of  ordinary  passengers,  and 
are  also  allowed  to  carry  an  excess  weight  up  to  a  total  of 
1,500  lbs.  at  half-parcel  rates.  Concession  orders  signed  by  a 
district  transportation  officer  must  be  produced  In  order  to  take 
advantage  of  these  privileges.  The  luggage  must  consist  of 
personal  luggage  or  samples  intended  solely  for  display  and  not 
for  sale. 

On  the  Natal  government  railways  commercial  travelers, 
on  the  production  of  credentials,  are  allowed  double  the  weight 
of  free  luggage  granted  to  ordinary  passengers  and  excess 
weights  are  charged  at  half-parcel  rates.  Their  luggage  must 
consist  of  personal  luggage  or  samples  intended  solely  for  dis- 
play and  not  for  selling  purposes.  Such  luggage  may  be  booked 
through  to  ultimate  destination,  but  must  accompany  the 
passenger. 

Resident  agents  of  companies  not  domiciled  in  Natal  are 
required  to  take  out  a  license  bearing  a  stamp  value  of  £5. 
A  joint-stock  company  must  take  out  an  annual  license  bearing 
stamps  of  the  value  of  £1  for  every  £1,000  or  fraction  of 
£1,000  of  paid-up  capital. 

In  Orange  Free  State  also  railroads  grant  certain  special 
facilities  to  commercial  travelers.  Full  information  on  this 
subject  may  be  obtained  from  the  Commercial  Intelligence 
Branch  of  the  Board  of  Trade,  London,  England. 

United  Kingdom  of  Great  Britain  and  Ireland 

No  special  taxes  are  levied  nor  is  a  license  required  by 
travelers  unless  they  solicit  or  take  orders  for  certain  specified 
goods.  In  such  cases  they  must  take  out  a  license,  unless  their 
principals  abroad  are  duly  licensed  in  the  United  Kingdom. 

Samples  and  patterns  of  commercial  value  brought  in  by 
commercial  travelers  must  be  declared  at  the  custom  house  on 


388  TRADE    REGULATIONS 

entry  and  must  be  marked  for  the  purpose  of  identification. 
Also  the  duty  leviable  must  be  deposited  or  security  given.  The 
deposit  is  refunded  if  re-exportation  occurs  within  12  months. 
By  virtue  of  the  arrangement  between  the  British  and  the 
United  States  governments  the  following  facilities  are  ac- 
corded by  the  British  customs  for  the  clearance  of  samples  of 
commercial  travelers  from  America.  On  the  production  of 
a  list  or  declaration  officially  attested  by  the  proper  authority 
in  the  country  of  exportation  and  containing  a  description  of 
the  samples  brought  by  the  traveler,  examination  of  the  sam- 
ples by  customs  officers  may  be  limited  to  ascertaining  that  they 
are  fully  enumerated  on  the  list  produced.  Further,  should  the 
samples  bear  the  marks,  stamps,  or  seals  of  the  country  of 
exportation,  no  additional  marks  or  seals  for  purposes  of  iden- 
tification will,  as  a  rule,  be  affixed  by  customs  officers  in  the 
United  Kingdom. 

United  States 

No  regulations  or  taxes  affecting  foreign  travelers  exist. 
There  are,  on  the  other  hand,  many  formalities  and  customs 
regulations  to  be  complied  with  before  the  entry  of  goods  and 
samples  is  permitted.  A  copy  of  these  regulations  may  be 
obtained   from  the  custom  house. 

Uruguay 

Travelers  must  obtain  a  license  costing  $100  (about  $105  in 
American  money).  A  license  is  good  for  one  year,  but  if  it 
is  taken  out  at  any  time  after  January  i,  it  is  good  only  to  the 
end  of  December.  Persons  desirous  of  obtaining  a  license 
should  apply  in  writing  to  the  chief  of  police  of  Montevideo 
on  a  paper  bearing  a  50-centavo  stamp.  The  license  tax  in 
the  Department  of  Montevideo  is  200  pesos  (about  $206)  ;  in 
the  other  departments  of  Uruguay  it  is  100  pesos  (about 
$103.50).     A  general  license  for  the  entire  country  may  be 


COMMERCIAL    TRAVELERS  389 

taken  out  for  300  pesos  (about  $310).  Travelers  must  regis- 
ter, the  cost  of  registration  being  12  pesos  or  $12.50. 

The  regulations  for  commercial  travelers  from  the  United 
States  to  Uruguay  are  determined  by  the  treaty  of  October 
10,  19 1 8.  By  the  terms  of  this  treaty,  commercial  travelers 
from  the  United  States  may  obtain,  upon  the  payment  of  a  sin- 
gle fee,  a  license  which  entitles  them  to  do  business  in  any  part 
of  the  country.  In  order  to  obtain  this  license  the  traveler 
must  present  a  certificate  of  good  character  viseed  by  the  consul 
of  Uruguay  in  the  United  States. 

Travelers  may  sell  their  samples  without  obtaining  a  special 
license  as  an  importer.  Samples  without  commercial  value  are 
admitted  free  of  duty  and  samples  of  value  are  granted  tem- 
porary free  admission  under  bond  for  their  re-exportation 
within  6  months. 

Venezuela 

There  are  no  special  regulations  concerning  commercial 
travelers.  A  license  is  required  only  in  case  the  traveler  sells 
the  samples  or  goods  he  carries.  The  cost  of  a  license  varies 
in  different  towns,  but  it  is  not  in  any  case  exorbitant;  indeed, 
the  license  seldom  is  really  necessary. 

All  persons  entering  Venezuela  are  required  to  produce  a 
certificate  of  vaccination  legalized  by  the  Venezuelan  govern- 
ment. Samples  over  25  kilograms  in  weight  are  liable  to  duty 
at  the  rate  of  a  bolivar  per  kilogram. 

Catalogues  are  admitted  free  of  duty.  Pamphlets  and  ad- 
vertising matter  in  general,  including  calendars,  are  dutiable  at 
$1.37  per  100  lbs.  gross  weight.  Lithographed  advertising  or 
printed  designs  are  dutiable  at  $17.13  per  100  lbs.  gross  weight. 

Zanzibar 

See  "British  Possessions  and  Protectorates." 


CHAPTER    XLIII 

CONSULAR  AND  SHIPPING  REQUIREMENTS 
IN  WORLD  TRADE 

Each  country  of  the  world  regulates  the  entry  of  foreign 
merchandise  through  its  ports  by  means  of  tariff  laws,  custom 
house  requirements,  and  consular  form.alities. 

The  regulations  in  some  countries  are  comparatively 
simple,  but  in  others  the  recjuirements  are  quite  complicated. 
The  summary  which  follows  has  been  compiled  with  great  care, 
but  owing  to  the  unsettled  conditions  prevailing  at  present 
throughout  the  world,  it  must  be  recognized  that  a  number  of 
these  requirements  are  subject  to  change. 

Africa 

On  the  East  Coast  no  consular  documents  of  any  kind  are 
reciuired,  but  in  the  Portuguese  possessions  bills  of  lading 
must  show  the  gross  and  net  weight  of  the  shipment,  the 
country  in  which  it  originated,  and  its  value.  French  posses- 
sions frequently  require  that  a  certificate  of  origin  be  pro- 
cured and  that  the  bills  of  lading  be  signed  by  the  shipper  or 
his  agent. 

On  the  North  Coast  no  consular  documents  of  any  kind 
are  required.  In  the  Union  of  South  Africa  a  certificate  must 
accompany  all  shipments  and  certain  conditions  for  invoicing 
goods  must  be  complied  with. 

On  the  West  Coast  of  Africa  no  consular  documents  are 
recpired  except  for  Liberia.  In  that  country  it  is  required 
that  three  copies  of  the  shipper's  invoice  be  secured  from 
the  consul. 

390 


CONSULAR    AND    SHIPPING    REQUIREMENTS         391 

Arabia 

No  consular  documents  are  necessary  for  shipments  to 
Aden  and  to  Bahrein,  hut  the  rest  of  Arabia  is  governed  by 
the  same  regulations  as  Turkey. 

Argentina 

In  Argentina  the  consul's  certification,  for  which  there  is 
a  charge  of  $2,  is  required  on  the  bills  of  lading  (three  copies) 
signed  by  the  steamship  company.  No  consular  invoice  is 
required.  Three  copies  of  the  certificate  of  origin  must  be 
filled  out  and  attached  to  these  bills  of  lading.  Shipments  may 
be  made  direct  or  "to  order."  Health  certificates  are  re- 
quired for  all  shipments  of  animal  products,  canned  goods, 
or  potatoes. 

Parcel  receipts  must  be  certified.  Regulations  pertaining 
to  the  shipment  of  food  products  are  quite  lengthy  and  the 
shipper  of  such  products  will  do  well  to  obtain  the  full  text 
from  the  consulate. 

Packages  for  shipment  should  be  marked  with  stencil  or 
brush  and  should  bear  the  name  of  the  steamer  by  which  they 
are  shipped ;  the  shipping  mark  and  number  should  appear  on 
two  adjacent  sides.  Merchandise  of  value  should  be  shipped 
in  clinched  cases,  so  that  in  case  the  clinches  are  broken  and 
shortages  occur,  the  responsibility  can  readily  be  placed. 

Australia 

No  consular  documents  of  any  kind  are  required,  but  cer- 
tain strict  regulations  exist  concerning  imports  under  the  so- 
called  "Trade  Descriptions  Act  of  1905."  The  merchant  ex- 
porting goods  into  Australia  should  obtain  a  copy  of  the  act 
and  familiarize  himself  fully  with  its  requirements.  It  may 
be  said  in  a  general  way  that  under  this  act  the  description  of 
goods  must  be  particularly  accurate,  as  all  merchandise  bear- 
ing false  or  exaggerated  description  is  barred  from  the  coun- 


392  TRADE    REGULATIONS 

try.  The  act  was  aimed  primarily  at  the  importers  of  patent 
medicines  and  food  products ;  consequently,  the  manufacturer 
of  these  lines  should  carefully  study  all  its  provisions  before 
venturing  to  make  a  shipment. 

Austria 

Before  the  war  no  consular  documents  of  any  kind  were 
required.  United  States  inspection  certificates  were  necessary, 
however,  on  all  shipments  of  meat  products. 

Belgium 

No  consular  regulations  or  government  restrictions  of  any 
kind  are  in  force  in  Belgium. 

Bolivia 

Very  extensive  and  intricate  regulations  exist  concerning 
packing,  marking,  weighing,  and  shipping.  It  will  be  advis- 
able for  the  exporter  to  obtain  detailed  rulings  from  the  con- 
sulate, as  the  regulations  change  frequently  and  vary  accord- 
ing to  the  route  over  which  the  shipment  is  made. 

The  consular  fee  for  certifyi»ng  an  invoice  for  goods  less 
than  $200  in  value  is  $3;  more  than  $200  in  value,  2  per 
cent.  Four  copies  of  the  consular  invoice  are  necessary  for 
shipments  via  Chile,  Argentina,  or  Brazil ;  five  copies  for  ship- 
ments via  Peru.  Consular  invoices  must  be  in  Spanish  and 
must  be  accompanied  by  bills  of  lading,  commercial  invoices, 
and  other  documents  indicating  the  market  value  of  the  ship- 
ment. Name  of  consignee  at  both  points  of  transshipment 
and  destination  must  be  given,  as  well  as  the  custom  house 
destination. 

Brazil 

A  consular  invoice  is  required  and  must  be  in  quadrupli- 
cate form,  the  consul  retaining  three  copies.     It  should  be 


CONSULAR    AND     SHIPPING    REQUIREMENTS         393 

prepared  in  Portuguese ;  if  it  is  in  English,  a  charge  for  trans- 
lation will  be  made.  No  consular  invoice  is  required  on  ship- 
ments the  total  value  of  which,  including  freight  and  expenses, 
is  less  than  $48.88,  but  such  consignments  must  be  shipped 
on  parcel  receipt.  Duty  is  payable  on  weight ;  in  some  cases 
on  legal  net  weight,  in  some  on  gross  weight,  and  in  some  on 
the  actual  net  weight.  The  laws  of  Brazil  prohibit  the  sale 
of  goods  bearing  a  false  label  as  to  their  origin.  The  con- 
sular fee  is  $2.20,  $1.38  of  which  is  collected  by  the  steam- 
ship company. 

The  exporter  must  sign  an  affidavit  or  declaration  of  con- 
tents and  value  for  each  shipment.  The  total  declared  value 
should  include  freight  and  shipping  expenses. 

Canada 

No  consular  regulations  of  any  kind  exist.  The  "Official 
Circular  to  Exporters,"  issued  by  the  Canadian  customs  author- 
ities gives  in  detail  the  various  formalities  necessary  in  im- 
porting goods  into  Canada.  The  regulations  concerning  medi- 
cines are  particularly  strict.  Certified  invoices  in  duplicate 
are  required  for  customs  entry,  but  they  may  be  mailed  to 
the  consignee  and  need  not  accompany  the  shipment.  The 
consignee's  full  name  and  address,  the  marks,  and  number  of 
packages  in  the  shipment  must  be  given  on  the  way-bills. 

Chile 

In  shipping  to  Chile,  four  copies  of  consular  invoices, 
written  in  Spanish,  are  required  except  in  the  case  of  parcel 
post  shipments  or  samples.  Bills  of  lading  must  be  furnished 
and  must  be  certified  to  by  the  consul,  who  keeps  one  copy. 
The  bill  of  lading  must  show  both  gross  and  net  weight  in 
kilograms.  Consul's  fees  average  about  %  per  cent  of  the 
value  of  the  shipment,  while  an  additional  charge  of  75  cents 
is  made  for  certification  of  the  bill  of  lading. 


294  TRADE    REGULATIONS 

In  marking  packages  a  stencil  must  be  used,  as  it  is  not 
permissible  to  mark  with  a  brush.  Each  package  must  bear 
a  shipping  number,  agreeing  with  the  number  stated  in  the 
consular  invoice  and  in  other  shipping  documents.  The  weight 
in  kilograms  should  be  marked  on  packages. 

No  erasures  are  permitted  on  invoices.  If  an  error  is 
made  a  separate  letter  of  correction  must  be  written  in  Spanish 
and  presented  to  the  consul  in  triplicate.  Shipments  "to 
order"  are  permissible. 

China 

• 

Except  for  Korea,  no  consular  documents  of  any  sort  are 
required.  In  importing  into  Korea  the  manufacturer's  invoice 
should  be  signed  by  the  manufacturer  or  the  seller  of  the 
goods.  Importation  into  any  part  of  China  of  firearms  or 
ammunition  can  be  made  only  by  permission  of  the  govern- 
ment. 

Colombia 

In  Colombia,  as  in  other  South  and  Central  American 
countries,  consular  and  shipping  regulations  are  extensive; 
hence  it  is  advisable  to  obtain  a  copy  of  regulations  from  the 
consulate.  These  regulations  are  especially  complicated  con- 
cerning the  importation  of  meats,  as  goods  of  this  kind, 
should  antiseptics  have  been  used  for  their  preservation,  may 
not  be  imported  at  all. 

Five  copies  of  a  consular  invoice  in  Spanish  are  required; 
four  of  these  must  be  presented  to  the  consul  the  day  before 
the  vessel  sails.  Each  invoice  must  show  name  of  shipper, 
consignee,  owner,  name  of  vessel,  mark  and  number,  con- 
tents and  gross  weight  of  each  package,  as  well  as  value  per 
package  and  total  f.o.b.  value  of  shipment;  also  freight,  in- 
surance, and  commission  to  port  of  entry.  Consul's  fees  range 
from  I  to  3  per  cent  of  value. 


CONSULAR    AND    SHIPPING    REQUIREMENTS 


395 


Shipments  "to  order"  are  not  permitted.  Goods  destined 
for  the  interior  of  the  country  must  be  consigned  to  an  agent 
at  the  port  of  entry. 

Cuba 

Consular  invoices  are  required  in  Cuba;  five  copies  for 
Havana  and  four  for  other  ports.  They  must  be  written  in 
Spanish  and  certified.  Bills  of  lading  must  also  be  certified 
by  the  consul.  The  consul's  fee  is  about  i  per  cent  of  the 
value  of  the  shipment,  while  an  additional  charge  of  $i  is 
made  for  certification  of  the  bill  of  lading.  There  are  special 
regulations  concerning  the  importation  of  firearms  and  patent 
medicines.     Shipments  "to  order"  are  accepted. 

Denmark 

No  consular  formalities  are  recjuired  by  Danish  authorities 
and  no  government  regulations  exist  as  to  weights,  marks, 
etc.  The  laws  do,  however,  prohibit  the  importation  and  sale 
of  any  goods  bearing  a  false  indication  as  to  the  country  of 
origin. 

Ecuador 

Ecuador  has  very  strict  entry  regulations  and  complicated 
consular  recjuirements  for  imports.  Seven  copies  of  consular 
invoices  in  Spanish  are  recjuired.  The  consul  keeps  four 
copies,  the  steamship  company  one,  the  shipper  one,  and  the 
remaining  one  is  sent  to  the  consignee.  Invoices  must  be 
presented  to  the  consul  not  later  than  4  p.m.  on  the  day  of 
the  vessel's  departure. 

There  are  special  regulations  concerning  the  marking  and 
weighing  of  packages,  one  of  which  is  that  a  separate  invoice 
is  required  for  each  mark.  Packages  should  be  marked  with 
stencil  and  should  show  gross  weight  in  kilograms.  Ship- 
ments "to  order"  are  permitted.     Consul's  fees  for  shipments 


396  TRADE    REGULATIONS 

are:  up  to  $50  in  value,  $1  ;  worth  more  than  $50,  3  per  cent 
of  their  value.  A  set  of  six  blanks  costs  50  cents,  while  a 
certificate  for  lists  of  small  shipments  costs  12^  cents. 

Egypt 

In  making  shipments  to  Egypt,  the  consignee  must  file  a 
declaration  as  to  weight,  number,  contents  of  packages,  etc. 
Sometimes  the  original  invoice  of  the  exporter  is  demanded 
at  the  custom  house.  The  British  consul  should  be  con- 
sulted for  detailed  information. 

France 

A  certificate  of  origin  and  one  consular  invoice  are  required 
in  most  cases  in  shipping  to  France.  On  shipments  of  meat 
and  food  products  from  this  country  a  United  States  inspec- 
tion certificate  is  required.  The  consular  invoice  is  issued  at 
a  charge  of  $2.50;  a  vise  of  certificate  of  origin  at  $2.20. 
There  are  many  other  formalities  to  be  complied  with  in  all 
cases  of  shipment  of  goods  to  France,  especially  in  connection 
with  shipments  of  medicines  and  tobacco. 

Germany 

Before  the  war,  there  were  no  consular  requirements  or 
government  restrictions  of  any  kind  regarding  shipments  to 
Germany.  The  laws  of  Germany  forbade  placing  on  sale 
the  goods  of  those  concerns  by  whom  trade-marks  have  been 
wrongfully  appropriated.  The  United  States  certificate  of 
inspection  was  required  for  shipments  of  meat. 

Great  Britain 

No  consular  regulations  exist  in  Great  Britain.  There 
are  lengthy  regulations  concerning  the  importation  of  goods 
where  the  trade-mark  has  been  registered  in  another  country. 
The  United  States  certificate  is  required  for  shipments  of  meat. 


CONSULAR    AND    SHIPPING    REQUIREMENTS         397 

Greece 

No  regulations  of  any  kind  exist  in  Greece.  The  United 
States  certificate  of  inspection  is  required  on  all  meat  ship- 
ments from  this  country.  There  are  no  government  restric- 
tions as  to  marks,  weights,  etc. 

Guatemala 

The  regulations  in  Guatemala  are  similar  to  those  of  other 
Latin-American  countries.  Five  consular  invoices,  prepared 
in  Spanish,  are  necessary.  Certain  regulations  exist  as  to  the 
manner  in  which  the  declarations  for  the  invoices  should  be 
made.  The  consular  fee  is  2  per  cent  of  the  value  of  the 
shipment;  $1  is  charged  for  certification  of  the  bill  of  lading. 
The  name  of  shipper  and  consignee,  place  of  origin  and  des- 
tination, name  of  vessel,  mark,  number,  gross  weight  of  con- 
tents and  character  of  each  package,  total  value  of  invoice,  and 
details  of  packages  must  be  stated  in  the  invoice.  Packages 
may  be  marked  with  a  stencil  or  brush.  Weights  need  not 
appear  on  the  package.  Packages  for  different  ports  cannot 
be  put  on  the  same  invoice.  Special  permits  are  required  for 
arms,  ammunition,  and  so  on.  Shipments  "to  order"  are  per- 
mitted. 

Haiti 

For  Haiti,  consular  invoices  are  necessary,  while  five  signed 
copies  of  the  bills  of  lading  are  required  at  the  consulate  for 
certification.  Invoices  may  be  prepared  either  in  English  or 
French.  The  consular  fee  is  $1.  Packages  may  be  marked 
with  stencil  or  brush,  and  shipments  "to  order"  are  permitted. 

Holland 

No  consular  requirements  or  government  restrictions  of 
any  kind  exist  In  Holland. 


398 


TRADE    REGULATIONS 


Honduras 

For  Honduras,  four  consular  invoices,  prepared  in  Spanish, 
are  required  for  each  different  mark.  The  consul's  fee  ranges 
from  $1  upward  according  to  the  value  of  the  shipment.  A 
commercial  invoice,  certified  to  by  the  consul,  is  also  required. 
The  importation  of  intoxicating  liquors  is  prohibited.  A  spe- 
cial permit  is  necessary  for  the  importation  of  firearms. 

Italy 

In  Italy  a  certificate  of  origin  is  usually  required.  A 
charge  of  $4.40  is  made  for  vise  of  the  certification.  Special 
regulations  exist  in  regard  to  some  articles,  such  as  tobacco, 
leather,  salt,  etc.  Gross  and  net  weight  should  be  stated  in 
the  bill  of  lading  on  shipments  of  tobacco,  while  all  bills  of 
lading  must  show  the  name  of  the  consignee. 

Japan 

A  certificate  of  origin,  which  must  be  vised  by  the  consul 
of  Japan,  is  required  only  on  shipments  of  certain  kinds  of 
goods.  A  charge  of  $2  is  made  for  vise  of  this  certificate  of 
origin.  Firearms,  salt,  and  tobacco  cannot  be  shipped  to 
Japan. 

Mexico 

In  Mexico  consular  invoices  must  be  sworn  to  before  a 
notary  and  presented  in  quadruplicate  form.  They  may  be 
prepared  in  either  English  or  Spanish.  A  set  of  four  consular 
blanks  costs  15  cents.  The  consul's  fee  is  3  per  cent  of  the 
value  of  the  shipment.  On  the  date  of  shipment,  invoices 
should  be  forwarded  by  registered  mail  to  the  collector  of 
customs  at  the  port  of  entry  and  also  to  the  department  of 
customs ;  postmasters'  receipts  to  go  to  the  consignee.  Special 
instructions  as  to  shipping,  packing,  and  marking  must  be 
followed.     Packages  may  be  marked  with  stencil  or  brush. 


CONSULAR    AND     SHIPPING    REQUIREMENTS         399 

Nicaragua 

Six  copies  of  consular  invoices,  prepared  in  Spanish,  are 
necessary  in  Nicaragua.  Bills  of  lading  prepared  in  Spanish 
must  be  presented  to  the  consul  for  certification,  and  the  fee 
of  $3  must  be  paid  by  the  shipper.  A  commercial  invoice 
must  also  be  presented.  Consular  blanks  in  sets  of  six  cost 
25  cents.  The  consular  regulations  are  very  lengthy.  Special 
instructions  as  to  packing  and  shipping  should  be  carefully 
followed.  In  case  of  raw  materials,  a  certificate  of  origin 
is  required. 

Norway 

No  consular  or  shipping  requirements  or  restrictions  of 
any  kind  exist  in  Norway. 

Panama 

Six  consular  invoices  in  Spanish  are  required  in  Panama; 
also  four  copies  of  the  bill  of  lading  certified  by  the  consul. 
The  consul's  fee  must  be  paid  by  the  consignee  at  the  port  of 
entry.  The  shipment  may  not  be  consigned  "to  order"  or 
"care  of."  Only  the  official  form  of  consular  invoice  may  be 
used.  If  the  material  is  for  transshipment,  notice  of  that 
fact  must  be  given.  Panama  Canal  Commission  goods  are 
exempt  from  all  regulations. 

Paraguay 

Consular  invoices  from  the  point  of  shipment  are  not  re- 
quired by  the  laws  of  Paraguay,  but  for  goods  going  via  Mon- 
tevideo, Uruguay  requires  invoices  and  bills  of  lading  certi- 
fied by  a  consul  of  Paraguay  at  the  point  of  shipment.  If 
goods  are  shipped  via  Buenos  Aires,  bills  of  lading  must  be 
viseed  by  the  consul  of  Argentina.  The  consul's  fee  is  $2 
for  the  certificate  of  origin,  but  there  is  no  charge  for  the 
viseing. 


400  TRADE    REGULATIONS 

Persia 

No  consular  documents  of  any  kind  are  required,  and  no 
government  regulations  as  to  marks,  weights,  etc.,  exist  in 
Persia.  A  shipping  permit  must  be  obtained  before  delivery 
is  made  at  the  steamship's  dock.  No  parcel  receipts  are 
issued. 

Peru 

In  Peru  consular  invoices  must  be  prepared  in  quadrupli- 
cate and  must  be  in  Spanish.  Certified  bills  of  lading  are  also 
required.  Regulations  exist  concerning  the  manner  of  mark- 
ing packages  and  preparing  goods  for  shipment,  which  must 
be  strictly  followed.  Marks  may  be  in  stencil  or  brush.  Goods 
may  be  consigned  "to  order."  The  consul's  fee  is  2  per  cent 
of  the  value  of  the  shipment. 

Portugal 

For  Portugal  the  consular  invoice  should  be  in  triplicate 
and  may  be  prepared  in  English  or  Portuguese.  There  are 
special  regulations  concerning  shipments  of  tobacco  and  patent 
medicines.  A  certificate  of  origin  in  many  cases  is  necessary. 
Usually  a  different  number  must  be  marked  on  each  package 
in  one  shipment  and  these  numbers  must  agree  with  the  num- 
bers in  the  consular  invoices.  The  consul's  fee  varies  from 
$2.20  to  $2.50. 

Roumania  and  the  Balkan  States 

There  are  no  consular  requirements  or  restrictions  of  any 
kind  for  the  Balkan  States,  except  for  Serbia.  (See  page  401 
for  regulations  for  Serbia.) 

Russia 

No  consular  requirements  existed  in  Russia  before  the 
revolution  but  there  were  important  formalities  to  be  com- 


CONSULAR    AND     SHIPPING     REQUIREMENTS         401 

plied  with  in  making  shipments.  It  is  advisable  to  secure  a 
complete  set  of  regulations  from  the  consulate  or  from  the 
American-Russian  Chamber  of  Commerce  before  making  a 
shipment  to  Russia. 

Salvador 

Consular  invoices  in  quadruplicate  must  be  prepared  in 
Spanish  and  bills  of  lading  must  be  certified  at  the  consulate. 
The  certification  of  bills  of  lading  costs  $1.  Shipments  "to 
order"  are  allowed.  Brush  or  stencil  marking  is  permitted  and 
weights  need  not  be  stated  on  packages. 

San  Domingo 

In  San  Domingo  certification  at  the  consulate  of  the  con- 
sular invoices  and  bills  of  lading  is  necessary,  but  consular 
charges  are  collected  at  the  port  of  entry.  Shipments  may 
be  consigned  "to  order"  and  separate  invoices  must  be  pre- 
pared for  each  mark.  Four  consular  invoices  and  bills  of 
lading  must  be  prepared  in  Spanish. 

Serbia 

For  Serbia,  three  copies  of  the  shipper's  invoice  are  re- 
quired by  the  consul,  also  a  declaration  on  the  face  of  every 
invoice.  A  form  of  this  declaration  may  be  procured  from 
the  consul.  The  consular  fees  vary  according  to  the  value 
of  merchandise  shipped.  For  instance,  for  the  certification 
of  a  shipper's  invoice  of  the  value  of  $480  or  upwards  the  fee 
is  $3. 

Spain 

No  consular  restrictions  exist  in  Spain,  but  a  certificate 
of  origin  and  a  certificate  of  destination  are  necessary  on 
shipments  of  certain  kinds  of  goods.  A  fee  of  40  cents  is 
made  for  vise  of  the  certificate  of  origin. 


402  TRADE    REGULATIONS 

Sweden 

No  consular  documents  are  required  in  normal  times  in 
Sweden,  but  strict  regulations  exist  in  reference  to  commer- 
cial invoices.  The  country  of  origin  must  be  clearly  indicated 
on  all  shipments  and  the  word  "import"  must  appear  with 
the  name  and  address  of  the  manufacturer. 

Switzerland 

No  consular  regulations  of  any  kind  concerning  foreign 
shipments  exist  in  normal  times  in  Switzerland. 

Turkey 

Declaration  of  merchandise  is  usually  necessary;  also  a 
certificate  of  origin,  made  out  in  French  and  certified  by  the 
Turkish  consul  at  the  point  of  shipment.  Charge  for  this 
certification  is  $2.  Ordinarily  no  consular  documents  are 
required  unless  requested  by  the  Turkish  importer. 

Uruguay 

Three  bills  of  lading  for  each  shipment  to  Uruguay  must 
be  certified  by  the  consul.  Certificates  of  origin  are  required 
in  duplicate.  Packages  may  be  marked  with  brush  or  stencil. 
Shipments  "to  order"  are  allowed.  Petroleum  shipments  re- 
quire first  test  certificates,  while  a  certificate  from  the  Depart- 
ment of  Agriculture  is  necessary  for  shipments  of  plants  into 
the  country. 

Three  certificates  are  required  for  all  shipments  of  animals 
— one  from  a  veterinarian  showing  that  the  animals  are  phys- 
ically sound,  one  from  the  railroad  company  stating  that  their 
cars  have  been  disinfected,  and  one  from  the  steamship  com- 
pany stating  that  the  animal's  quarters  on  the  ship  have  been 
disinfected. 

The  importation  of  many  kinds  of  goods,  such  as  alcohol, 
edible  oils,  etc.,  is  prohibited. 


CONSULAR    AND     SHIPPING    REQUIREMENTS         403 

Venezuela 

For  Venezuela  a  consular  invoice,  prepared  in  Spanish,  is 
required.  Four  copies  of  this  invoice  should  be  presented  for 
certification  at  the  consulate.  Goods  cannot  be  shipped  "to 
order."  Firearms  can  be  imported  only  by  special  permission 
from  the  government.  Foodstuffs  shipped  to  Venezuela  from 
this  country  should  bear  the  United  States  stamp  of  inspection, 
as  strict  pure-food  regulations  exist.  When  an  invoice  has 
more  than  one  mark,  an  extra  25  per  cent  is  added  to  the  con- 
sular charges  for  each  additional  mark. 

New  Countries 

Several  countries  where  unsettled  conditions  prevail  have 
not  been  mentioned  as  the  many  new  political  alignments 
which  are  being  made  at  this  time  render  it  impossible  to  com- 
plete in  an  authentic  way  the  data  presented  in  this  chapter. 
Such  countries  as  Poland,  Bohemia,  Lithuania,  Bavaria, 
Czecho-Slovakia,  and  others  of  like  status  have  been  omitted 
from  the  preceding  list  on  account  of  the  unsettled  conditions 
prevailing  within  their  borders.  The  Department  of  State 
at  Washington  will  be  able  to  give  as  authentic  information 
concerning  any  regulations  these  countries  may  now  have, 
as  is  obtainable  anywhere. 


CHAPTER    XLIV 

CREDIT  CUSTOMS  OF  THE  WORLD 

A  digest  of  the  usual  credit  customs  in  each  of  the  various 
foreign  countries  follows. 

Argentina 

The  wholesale  trade  usually  requires  6  months'  credit  but 
small  dealers  require  only  from  i  to  3  months.  These  small 
dealers  frequently  pay  cash  for  either  a  whole  or  part  of  the 
order,  but  in  large  transactions  cash  payments  are  rare.  The 
prevalent  rate  of  discount  runs  as  high  as  6  per  cent.  For 
payment  within  30  days  a  discount  of  5  per  cent  is  given, 
with  I  per  cent  less  for  each  additional  month  that  payment 
is  deferred. 

Australia  and  New  Zealand 

Many  Australian  firms  maintain  branches  in  London 
through  which  foreign  purchases  are  made.  Several  credit  cus- 
toms prevail  in  connection  with  goods  sold  to  Australian  mer- 
chants.    The  principal  ones  may  be  summarized  as  follows: 

1.  When  the  seller  delivers  the  order  at  the  ship's  side. 

handing  the  buyer  the  ship's  receipt  for  his  invoice, 
the  usual  custom  is  to  allow  30  days'  credit. 

2.  When  there  is  neither  a  branch  office  nor  an  agent,  a 

letter  of  credit  is  established  wnth  the  banker  and  the 
shipper's  draft  against  documents  at  90  to  120  days 
after  sight  is  paid,  charges  being  borne  by  buyer. 

3.  The  buyer's  banker  receives  the  documents  and  pays 

cash  for  the  face  value. 

404 


CREDIT    CUSTOMS    OF    THE    WORLD  405 

4.  The  indent  is  forwarded  to  the  suppHer,  who  presents 

the  documents  to  the  banker  and  obtains  from  75 
to  80  per  cent  cash  and  the  balance  on  60  to  120 
days'  credit. 

5.  Bank  references  are  demanded  on  a  draft  for  the  full 

value  pending  the  ascertainment  of  proof  of  buyer's 
responsibility. 

Austria 

Credit  varies  according  to  the  lines  of  merchandise  or 
articles  sold.  Some  articles  sell  for  cash,  others  at  10,  20,  or 
30  days  and  even  from  2  to  6  months'  credit,  according  to 
the  code  of  commercial  "usances"  which  regulates  credit. 
Flour  is  sold  on  a  30  to  60  days'  basis,  dry  goods  3  to  6  months, 
groceries  2  to  4  months.  The  general  discount  for  cash  is 
2  per  cent. 

Belgium 

Large  firms  demand  90  days'  time  and  sometimes  insist 
on  as  long  as  i  year.  Short  credits,  however,  are  the  general 
rule  and  the  cash  payment  basis  is  not  uncommon.  The  rate 
of  discount  varies  from  2  to  6  per  cent  and  is  usually  allowed 
on  payments  made  in  from  30  to  60  days.  Discount  is  allowed 
also  on  drafts,  which  circulate  extensively  like  bank  notes 
before  being  cashed. 

Bolivia 

European  traders  allow  from  3  to  6  months'  credit.  A 
renewed  acceptance  is  not  valid  unless  it  bears  the  signature 
of  both  drawer  and  drawee.  Before  the  war  Germans  held  the 
preponderance  of  trade  in  Bolivia,  and  it  was  difficult  to  over- 
come their  competition  as  they  were  exceedingly  generous  in 
their  terms  to  the  natives.  Trade  is  rather  difficult  on  account 
of  transportation  and  local  conditions. 


4o6  TRADE    REGULATIONS 

Brazil 

Credit  at  90  days'  sight  is  the  prevailing  custom  in  doing 
business  with  the  best  class  of  Brazilian  merchants.  The  time 
is  often  lengthened  to  120  days  in  outposts,  and  for  heavy 
machinery  runs  from  6  to  9  months.  The  indents  are  made 
out,  as  a  rule,  on  a  basis  of  90  days  from  the  date  of  arrival 
of  goods  from  Europe  and  30  days  from  the  date  of  arrival 
from  the  United  States.  Discounts  are  allowed  for  short 
credits  as  well  as  for  cash,  the  terms  being  somewhat  similar 
to  those  prevailing  in  New  York,  but  varying  both  according 
to  circumstances  and  to  the  line  of  merchandise. 

British  Honduras 

The  prevalent  custom  is  for  settlements  to  be  made  every 
month  or  two,  but  British  merchants  grant  4  to  6  months' 
credit  and  allow  a  2^  per  cent  discount  for  cash.  In  some 
cases,  however,  as  much  as  5  per  cent  discount  is  allowed, 
each  line  of  trade  having  its  special  rate.  A  bill  of  lading, 
if  properly  certified,  is  negotiable,  and  banks  in  Honduras  will 
make  advances  on  them  on  a  basis  of  3  to  6  months. 

British  South  Africa 

Ninety  days'  draft  is  the  prevailing  practice,  but  unless  a 
draft  is  accompanied  by  special  instructions  no  document  giv- 
ing title,  such  as  a  bill  of  lading,  is  handed  over.  Many  large 
houses  pay  for  their  shipments  on  delivery  and  orders  are  fre- 
quently resold  before  they  are  fully  delivered.  All  the  large 
trading  concerns  have  running  accounts  in  London  and  on  the 
Continent. 

British  West  Indies 

The  prevailing  custom  is  to  grant  credit  for  3  months  from 
the  receipt  of  goods  or  for  4  months  from  the  date  of  ship- 
ment.   American  bills  are  discounted  by  some  local  merchants 


CREDIT    CUSTOMS     OF    THE    WORLD  407 

for  cash  at  2  per  cent.  Invoices  are  usually  settled  by  the 
acceptance  of  a  draft  drawn  upon  the  Colonial  Bank.  The 
customary  rate  of  interest  is  6  per  cent. 

Bulgaria  and  Balkan  States 

Long  credits  extending  from  6  months  to  i  year  are  the 
custom  and  are  granted  by  concerns  which  have  a  personal 
representative  on  the  ground.  Unless  it  is  feasible  to  send 
such  a  representative,  foreign  business  in  this  field  does  not 
seem  practical. 

Canada 

The  customary  credit  granted  is  2  to  6  months,  according 
to  the  size  of  the  firm  and  the  line  of  goods.  Dry  goods  are 
sold  on  4  to  6  months'  credit.  Prevailing  rates  of  discount 
are  4  to  7  per  cent,  but  these  rates  are  graded  differently 
from  those  allowed  in  the  United  States. 

Chili 

The  credit  time  generally  granted  by  the  Germans,  the 
French,  and  the  English  is  6  months.  Cash  payments  are  very 
rare  and  international  trade  is  difficult  to  carry  on  in  Chili 
unless  branches  of  home  banks  are  established  there. 

China 

Transactions  are  usually  conducted  on  the  basis  of  60  days' 
draft  for  goods  sent  from  England  and  30,  60,  90,  or  120 
days'  draft  for  imports  from  the  Continent.  The  draft  is 
placed  in  the  bank  together  with  the  titular  documents,  such 
as  the  invoice,  bill  of  lading,  and  insurance  papers,  which  al- 
ways accompany  it. 

On  the  arrival  of  these  documents  in  China,  the  draft  is 
accepted  by  the  drawee,  and  if  the  terms  so  require  the  docu- 
ments are  delivered  to  him.     If  the  documents  are  deposited 


4o8  TRADE    REGULATIONS 

against  payment  instead  of  against  acceptance,  it  is  then  only 
on  the  date  of  expiration  of  the  draft  that  the  merchant  re- 
ceives the  merchandise.  The  bank,  in  the  meantime,  unloads 
and  stores  the  shipments.  In  some  cases,  the  bank  allows  the 
merchant  to  make  a  part  payment  and  to  take  the  quantity 
of  goods  for  which  he  has  paid. 

Colombia 

The  terms  of  credit  required  and  often  allowed  are  6  to 
12  months,  as  bills  owed  local  firms  by  their  debtors  are 
frequently  paid  in  coffee,  which  they  in  turn  must  sell  before 
they  can  meet  their  obligations.  A  5  per  cent  discount  is 
allowed  for  cash. 

Cuba 

Terms  of  payment  vary  from  3  to  12  months  according  to 
the  line  of  merchandise,  but  long  credits  are  the  rule  rather 
than  the  exception.  The  rate  of  discount  varies  according  to 
agreement  between  the  parties,  but  it  is  ordinarily  about  5  or 
6  per  cent. 

Denmark 

The  credit  usually  granted  is  3  to  9  months.  The  Ger- 
mans, who  had  a  large  portion  of  Denmark's  trade,  gave  the 
natives  5  to  6  per  cent  on  payments  made  within  3  months 
after  the  date  of  delivery. 

Ecuador 

Cash  business  is  very  rare,  the  general  custom  being  to 
grant  between  3  and  6  months'  credit.  The  standing  of  the 
firm,  the  nature  of  goods,  and  other  circumstances  enter  into 
the  determination  of  what  this  time  shall  be  in  a  particular  case. 
.\s  cash  payments  are  so  unusual,  little  is  known  in  Ecuador 
about  discounts. 


CREDIT    CUSTOMS    OF    THE    WORLD  409 

Egypt 

The  usual  arrangement  is  a  3  months'  draft,  with  the  bill 
of  lading  and  insurance  papers  attached.  Houses  of  high 
standing  buy  goods  on  draft  at  30  days'  sight.  Drafts  are 
generally  sent  through  the  banks,  while  a  discount  of  2  per 
cent  is  usually  allowed  for  cash. 

France 

The  average  length  of  credit  term  is  90  days,  though  terms 
of  30  and  60  days  are  quite  common.  Payments  are  usually 
made  by  drafts  drawn  by  the  sender  on  the  buyer.  French 
bankers  cash  these  drafts  at  a  discount.  At  the  French  ship- 
ping ports  payments  are  made  by  bank  credits  or  documentary 
drafts. 

This  means,  in  the  first  instance,  that  the  shipper  or 
the  French  buyer  gives  the  seller  a  written  guarantee  from 
a  bank  that  it  will  accept  the  seller's  drafts  and  pay  them  at 
maturity  on  delivery  of  titular  documents.  The  banker  may 
deliver  the  documents  to  the  buyer  against  payment  or  give 
credit  at  his  own  risk.  In  case  a  bank  fails  while  in  posses- 
sion of  the  documents  guaranteeing  title  to  the  property,  the 
buyer  will  be  held  responsible  for  the  full  amount  of  the  pur- 
chase price. 

Germany 

The  credit  granted  before  the  war  was  often  3  to  6  months, 
but  30  to  90  days  were  the  usual  terms  on  which  business  was 
conducted  throughout  the  country.  The  rules  of  different 
houses  and  the  nature  of  the  goods  had  an  influence  on  the 
terms  of  credit.  When  a  purchaser  was  of  doubtful  financial 
standing  cash  payment  was  demanded.  Discounts  were  gen- 
erally allowed,  but  they  varied  so  much  that  no  general  rule 
was  established.  In  general,  German  credit  terms  are  more 
generous  than  those  offered  in  this  country. 


4IO  TRADE    REGULATIONS 

Greece 

Nearly  all  of  the  local  merchants  do  business  on  credit, 
frequently  granting  very  long  terms  to  their  customers.  For 
this  reason  the  importing  business  of  Greece  is  conducted  on 
long  credits.  The  general  term  of  credit  is  6  months,  and 
6  per  cent  is  allowed  for  cash  payments.  Local  banks  accept 
drafts  and  will  deal  with  foreign  firms  on  recommendation  of 
any  reputable  local  concern. 

Guatemala 

The  terms  of  credit  run  from  6  months  to  i  year.  Such 
long  credit  is  indispensable  on  account  of  local  conditions. 
A  discount  of  3  and  4  per  cent  is  allowed  on  cash  payments. 

Haiti 

From  60  days  to  i  year  or  longer  are  the  usual  credit  terms. 
The  business  of  the  country  is  conducted  almost  entirely  on 
credit. 

Honduras 

Credit  is  often  allowed  for  from  4  to  9  months,  but  Amer- 
ican shippers  usually  allow  but  90  days  to  the  buyer. 

India 

Long  credits  are  usually  granted  and  large  discounts  are 
given  for  cash  payments.  Nearly  all  the  import  business  is 
done  by  British  firms. 

Italy 

The  customary  credit  allowance  is  90  days  to  8  months, 
the  nature  of  the  goods  having  much  to  do  with  the  matter. 
Some  classes  of  goods  sell  on  30  days',  others  on  90  days' 
credit.  A  rate  of  5  per  cent  is  charged  by  the  banks  on  drafts 
remaining  unpaid  after  maturity. 


CREDIT    CUSTOMS    OF    THE    WORLD  411 

Japan 

The  prevalent  practice  in  Japan,  in  so  far  as  the  foreign 
trade  is  concerned,  seems  to  be  to  pay  cash.  Of  course  there 
are  many  exceptions  to  this  rule,  among  which  are  the  tranS' 
actions  on  open  account.  If  the  seller  finds  that  he  can  dis- 
count the  promissory  notes  of  the  buyer  he  usually  does  busi- 
ness by  accepting  them  and  charging  the  discount  to  the 
drawee.  Under  the  laws  of  Japan,  a  promissory  note,  if  in 
proper  legal  form,  amounts  to  a  judgment.  These  notes 
usually  are  drawn  on  30  to  60  days'  time.  It  is  best  to  arrange 
with  the  buyer  through  bankers  in  the  United  States  for  a 
confirmed  letter  of  credit  which  enables  the  shipper  to  secure 
cash  against  documents  the  moment  he  places  the  goods  in 
the  custody  of  a  steamship  company. 

Mexico 

American  firms  usually  insist  on  the  entire  amount  of 
their  invoice  being  deposited  in  some  American  bank  before 
shipping  the  goods,  although  Mexico  in  normal  times  is  in 
good  repute  throughout  the  commercial  world.  European 
houses  usually  allow  4  to  6  months'  credit  to  responsible  con- 
cerns in  Mexico,  and  a  number  of  manufacturers  in  the  United 
States  are  now  selling  on  the  basis  of  30  to  90  days'  credit. 
A  discount  of  2  per  cent  is  given  when  cash  accompanies  the 
order. 

Netherlands 

The  business  of  Holland  is  conducted  on  the  basis  of  6 
months'  credit,  and  even  i  year  accounts  are  not  unusual. 
Since  all  the  domestic  business  is  dependent  on  long  terms 
of  credit,  foreign  houses  which  transact  business  in  the  Nether- 
lands are  obliged  to  conform  to  the  policy  of  granting  long 
terms  of  credit.  A  discount  of  from  2  to  4  per  cent  is  given 
on  cash  payments. 


412  TRADE    REGULATIONS 

Nicaragua 

The  general  credit  agreement  is  6  months  to  i  year, 
and  cash  payments  are  almost  unheard  of  among  merchants 
in  Nicaragua.  Discounts  for  such  payments  run  as  high  as 
6  per  cent. 

Paraguay 

Credit  is  usually  extended  for  about  6  months,  but  some- 
times for  as  long  as  a  year. 

Peru 

The  basis  upon  which  business  is  conducted  in  Peru  is  6 
to  12  months'  credit.  In  special  cases  credit  is  extended  for 
an  even  longer  time.  European  exporters  who  control  trade 
in  Peru  usually  give  90  days'  to  6  months'  credit  from  the  date 
of  delivery. 

Portugal 

From  I  to  6  months  is  the  customary  credit  allowed  by 
foreign  shippers,  but  in  prosperous  times  many  Portuguese 
merchants  will  be  found  ready  to  pay  cash.  A  discount  rate 
of  6  per  cent  is  obtainable  for  payment  within  30  days  in  cer- 
tain lines  of  merchandise. 

Roumania 

Countries  near  Roumania  usually  give  long  credits,  but 
the  far-off  countries  are  in  the  habit  of  demanding  cash 
against  documents, 

Russia 

The  present  political  and  economic  status  of  Russia  is 
such  that  no  phase  of  the  country's  commercial  procedure  can 
be  referred  to  as  "customary."  Consequently,  there  can  be 
at  present  no  authentic  information  as  to  credit  customs. 


CREDIT    CUSTOMS    OF    THE    WORLD  413 

Salvador 

European  exporters  have  been  granting  long  terms  of  credit 
in  Salvador  but  the  best  houses  of  the  country  have  business 
agencies  in  the  United  States  and  Europe  which  discount  their 
notes  or  give  security  for  payment.  Many  of  Salvador's 
importers,  however,  have  lately  shown  a  distinct  preference 
for  making  cash  payments  with  a  discount  for  such  payment 
of  2  or  3  per  cent. 

San  Domingo 

The  general  term  of  credit  in  San  Domingo  is  90  days, 
and  the  rate  of  discount  is  from  2  to  5  per  cent  for  cash  pay- 
ments or  for  payments  made  within  30  days. 

Siam 

A  credit  of  from  3  to  6  months  is  granted  by  European 
traders  in  close  touch  with  the  most  important  traders  in  Siam. 

Spain 

The  customary  term  of  credit  varies  from  90  days  to  6 
months,  but  the  banks  of  the  country  will  not  discount  any 
commercial  paper  or  make  allowance  for  a  period  longer  than 
90  days. 

Sweden  and  Norway 

The  credit  demanded  is  3  to  6  months. 

Switzerland 

Long  credits  prevail  at  30  to  90  days,  with  2  per  cent  dis- 
count for  cash  payments. 

Turkey 

The  custom  as  to  credit  varies.  The  most  common  term 
seems  to  be  6  months,  but  Turkish  merchants  do  quite  an 


414  TRADE    REGULATIONS 

extensive  cash  business  with  foreign  firms  and  are  usually  pre- 
pared to  give  security.  The  rate  of  discount  for  cash  pay- 
ments seldom  exceeds  2  per  cent.  A  great  deal  of  foreign 
business  is  conducted  through  the  banks. 

United  Kingdom  of  Great  Britain  and  Ireland 

The  usual  credit  allowance  is  30  to  60  days.  A  discount 
of  2^  per  cent  or  more  is  allowed  for  cash,  varying  according 
to  the  class  of  trade. 

United  States 

Credit  terms  and  the  conditions  of  sale  are  as  varied  as 
the  goods  sold.  The  prevailing  time  which  is  allowed  for 
settlement  of  accounts  between  local  traders  seems  to  be  30 
to  60  days.    In  some  lines  of  trade  time  extensions  are  allowed, 

Uruguay 

Strong  houses  prefer  to  make  cash  payments.  In  the  in- 
terior credit  is  usually  extended  for  from  3  to  6  months. 

Venezuela 

The  usual  credit  allowance  varies  between  30,  60,  90  days, 
and  6  months.  Discounts  of  from  4  to  6  per  cent  are  given 
for  cash,  but  cash  business  is  rare  in  Venezuela.  It  is,  how- 
ever, a  very  easy  matter  to  arrange  with  a  bank  to  cash  the 
drafts  of  Venezuelan  merchants,  as  their  credit  as  a  rule  is 
excellent. 


APPENDIX 


APPENDIX  A 

GOVERNMENTAL  ENACTMENTS  AND  AGENCIES 

Text  of  Webb-Pomerene  Law 

An  Act  to  promote  export  trade,  and  for  other  purposes. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the 
United  States  of  America  in  Congress  assembled,  That  the  words 
"export  trade"  wherever  used  in  this  Act  mean  solely  trade  or  com- 
merce in  goods,  wares,  or  merchandise  exported,  or  in  the  course  of 
being  exported  from  the  United  States  or  any  Territory  thereof  to 
any  foreign  nation ;  but  the  words  "export  trade"  shall  not  be  deemed 
to  include  the  production,  manufacture,  or  selling  for  consumption  or 
for  resale,  within  the  United  States  or  any  Territory  thereof,  of  such 
goods,  wares,  or  merchandise,  or  any  act  in  the  course  of  such  pro- 
duction, manufacture,  or  selling  for  consumption  or  resale. 

That  the  words  "trade  within  the  United  States"  wherever  used 
in  this  Act  mean  trade  or  commerce  among  the  several  States  or  in 
any  Territory  of  the  United  States,  or  in  the  District  of  Columbia, 
or  between  any  such  Territory  and  another,  or  between  any  such 
Territory  or  Territories  and  any  State  or  States  or  the  District  of 
Columbia,  or  between  the  District  of  Columbia  and  any  State  or 
States. 

That  the  word  "association"  wherever  used  in  this  Act  means 
any  corporation  or  combination,  by  contract  or  otherwise,  of  two  or 
more  persons,  partnerships,  or  corporations. 

Sec.  2.  That  nothing  contained  in  the  Act  entitled  "An  Act  to 
protect  trade  and  commerce  against  unlawful  restraints  and  mo- 
nopolies," approved  July  second,  eighteen  hundred  and  ninety,  shall 
be  construed  as  declaring  to  be  illegal  an  association  entered  into  for 
the  sole  purpose  of  engaging  in  export  trade  and  actually  engaged 
solely  in  such  export  trade,  or  an  agreement  made  or  act  done  in  the 
course  of  export  trade  by  such  association,  provided  such  association, 
agreement,  or  act  is  not  in  restraint  of  trade  within  the  United  States, 
and  is  not  in  restraint  of  the  export  trade  of  any  domestic  competitor 

417 


4i8 


APPENDIX 


of  such  association :  And  provided  further,  That  such  association  does 
not,  either  in  the  United  States  or  elsewhere,  enter  into  any  agree- 
ment, understanding  or  conspiracy,  or  do  any  act  which  artificially  or 
intentionally  enhances  or  depresses  prices  within  the  United  States 
of  commodities  of  the  class  exported  by  such  association  or  which 
substantially  lessens  competition  within  the  United  States  or  otherwise 
restrains  trade  therein. 

Sec.  3.  That  nothing  contained  in  section  seven  of  the  Act  en- 
titled "An  Act  to  supplement  existing  laws  against  unlawful  restraints 
and  monopolies,  and  for  other  purposes,"  approved  October  fifteenth, 
nineteen  hundred  and  fourteen,  shall  be  construed  to  forbid  the 
acquisition  or  ownership  by  any  corporation  of  the  whole  or  any  part 
of  the  stock  or  other  capital  of  any  corporation  organized  solely  for 
the  purpose  of  engaging  in  export  trade,  and  actually  engaged  solely 
in  such  export  trade,  unless  the  effect  of  such  acquisition  or  owner- 
ship may  be  to  restrain  trade  or  substantially  lessen  competition  within 
the  United  States. 

Sec.  4.  That  the  prohibition  against  "unfair  methods  of  competi- 
tion" and  the  remedies  provided  for  enforcing  said  prohibition  con- 
tained in  the  Act  entitled  "An  Act  to  create  a  Federal  Trade 
Commission,  to  define  its  powers  and  duties,  and  for  other  purposes," 
approved  September  twenty-sixth,  nineteen  hundred  and  fourteen, 
shall  be  construed  as  extending  to  unfair  methods  of  competition  used 
in  export  trade  against  competitors  engaged  in  export  trade,  even 
though  the  acts  constituting  such  unfair  methods  are  done  without 
the  territorial  jurisdiction  of  the  United  States. 

Sec.  5.  That  every  association  now  engaged  solely  in  export  trade, 
within  sixty  days  after  the  passage  of  this  Act,  and  every  association 
entered  into  hereafter  which  engages  solely  in  export  trade,  within 
thirty  days  after  its  creation,  shall  file  with  the  Federal  Trade  Com- 
mission a  verified  written  statement  setting  forth  the  location  of  its 
offices  or  places  of  business,  and  the  names  and  addresses  of  all  its 
officers  and  of  all  its  stockholders  or  members,  and  if  a  corporation, 
a  copy  of  its  certificate  or  articles  of  incorporation  and  by-laws,  and 
if  unincorporated,  a  copy  of  its  articles  or  contract  of  association, 
and  on  the  first  day  of  January  of  each  year  thereafter  it  shall  make 
a  like  statement  of  the  location  of  its  offices  or  places  of  business  and 
the  names  and  addresses  of  all  its  officers  and  of  all  its  stockholders 
or  members  and  of  all  amendments  to  and  changes  in  its  articles  or 
certificate  of  incorporation  or  in  its  articles  or  contract  of  association. 


APPENDIX 


419 


It  shall  also  furnish  to  the  commission  such  information  as  the  com- 
mission may  require  as  to  its  organization,  business,  conduct,  practices, 
management,  and  relation  to  other  associations,  corporations,  partner- 
ships, and  individuals.  Any  association  which  shall  fail  so  to  do 
shall  not  have  the  benefit  of  the  provisions  of  section  two  and 
section  three  of  this  Act,  and  it  shall  also  forfeit  to  the  United  States 
the  sum  of  $100  for  each  and  every  day  of  the  continuance  of  such 
failure,  which  forfeiture  shall  be  payable  into  the  Treasury  of  the 
United  States,  and  shall  be  recoverable  in  a  civil  suit  in  the  name  of 
the  United  States  brought  in  the  district  where  the  association  has 
its  principal  office,  or  in  any  district  in  which  it  shall  do  business. 
It  shall  be  the  duty  of  the  various  district  attorneys,  under  the 
direction  of  the  Attorney-General  of  the  United  States,  to  prosecute 
for  the  recovery  of  the  forfeiture.  The  costs  and  expenses  of  such 
prosecution  shall  be  paid  out  of  the  appropriation  for  the  expenses  of 
the  courts  of  the  United  States. 

Whenever  the  Federal  Trade  Commission  shall  have  reason  to 
believe  that  an  association  or  any  agreement  made  or  act  done  by 
such  association  is  in  restraint  of  trade  within  the  United  States  or 
in  restraint  of  the  export  trade  of  any  domestic  competitor  of  such 
association,  or  that  an  association  either  in  the  United  States  or  else- 
where has  entered  into  any  agreement,  understanding,  or  conspiracy, 
or  done  any  act  which  artificially  enhances  or  depresses  prices  within 
the  United  States  of  commodities  of  the  class  exported  by  such 
a'ssociation  or  which  substantially  lessens  competition  within  the 
United  States  or  otherwise  lessens  trade  therein,  it  shall  summon 
such  association,  its  officers,  and  agents  to  appear  before  it,  and 
thereafter  conduct  an  investigation  into  the  alleged  violations  of  law. 
Upon  investigation,  if  it  shall  conclude  that  the  law  has  been  violated, 
it  may  make  to  such  association  recommendations  for  the  readjustment 
of  its  business,  in  order  that  it  may  thereafter  maintain  its  organiza- 
tion and  management  and  conduct  its  business  in  accordance  with 
law.  If  such  association  fails  tO'  comply  with  the  recommendations 
of  the  Federal  Trade  Commission,  said  commission  shall  refer  its 
findings  and  recommendations  to  the  Attorney-General  of  the  United 
States  for  such  action  thereon  as  he  may  deem  proper. 

For  the  purpose  of  enforcing  these  provisions  the  Federal  Trade 
Commission  shall  have  all  the  powers,  so  far  as  applicable,  given  it 
in  "An  Act  to  create  a  Federal  Trade  Commission,  to  define  its 
powers  and  duties  and  for  other  purposes."   [Approved  April  10, 1918.] 


420  APPENDIX 

Law  of  Drawback 

Exported  merchandise  is  entitled  to  a  refund  of  99  per  cent 
of  the  import  duty  paid  on  materials  used  in  the  manufacture 
of  such  merchandise.  This  refund  is  known  as  "drawback." 
The  privilege  is  an  important  one  and  has  the  effect  of  necessi- 
tating the  payment  of  only  i  per  cent  duty  on  goods  imported 
for  use  in  the  manufacture  of  other  articles  to  be  exported. 

Exporters  thus  far  have  not  taken  full  advantage  of  this 
liberal  provision  of  our  tariff  law,  although  those  firms  which 
realize  its  advantages  usually  employ  a  drawback  agent  to  look 
after  the  details  of  drawback. 

In  order  to  obtain  drawback,  a  manufacturer  must  make  ap- 
plication to  the  United  States  Treasury  Department.  Agents 
of  the  Treasury  Department  then  investigate  the  manufac- 
turer's claim  and  if  it  is  found  to  be  justifiable,  permission  to 
claim  drawback  is  granted.  The  exporting  manufacturer  need 
not  be  himself  the  manufacturer  of  the  materials  upon  which 
drawback  is  claimed. 

At  some  time  before  the  shipment  is  ready  for  export,  the 
manufacturer  should  mail  to  his  drawback  agent  a  "Notifica- 
tion Blank."  The  latter  then  advises  the  collector  of  customs. 
A  "Notice  of  Intent"  is  also  filled  out  by  the  manufacturer  and 
is  delivered  to  the  United  States  district  inspector  at  the  pier. 

Following  is  the  official  wording  of  Section  25  of  the  Tariff 
Act  of  1909  relating  to  drawbacks: 

That  where  imported  materials  on  which  duties  have  been  paid 
are  used  in  the  manufacture  of  articles  manufactured  or  produced  in 
the  United  States,  there  shall  be  allowed  on  the  exportation  of  such 
articles  a  drawback  equal  in  amount  to  the  duties  paid  on  the  ma- 
terials used,  less  one  percentum  of  such  duties ;  Provided,  that  when 
the  articles  exported  are  made  in  part  from  domestic  materials  the 
imported  materials,  or  the  parts  of  the  articles  made  from  such  ma- 
terials, shall  so  appear  in  the  completed  articles  that  the  quantity 
or  measure  thereof  may  be  ascertained;  And  provided  further,  that 


APPENDIX  421 

the  drawback  on  any  article  allowed  under  existing  law  shall  be 
continued  at  the  rate  herein  provided.  That  the  imported  materials 
used  in  the  manufacture  or  production  of  articles  entitled  to  draw- 
back of  customs  duties  when  exported  shall,  in  all  cases  where  draw- 
back of  duties  paid  on  such  materials  is  claimed,  be  identified,  the 
quantity  of  such  materials  used  and  the  amount  of  duties  paid  thereon 
shall  be  ascertained,  the  facts  of  the  manufacture  or  production  of 
such  articles  in  the  United  States  and  their  exportation  therefrom 
shall  be  determined,  and  the  drawback  due  thereon  shall  be  paid  to 
the  manufacturer,  producer  or  exporter,  to  the  agent  of  either  or  to 
the  person  to  whom  such  manufacturer,  producer,  exporter,  or  agent 
shall  in  writing  order  such  drawback  paid,  under  such  regulations  as 
the  Secretary  of  the  Treasury  shall  prescribe. 

That  on  the  exportation  of  medicinal  or  toilet  preparations  (in- 
cluding perfumery)  hereafter  manufactured  or  produced  in  the  United 
States  in  part  from  domestic  alcohol  on  which  an  internal  revenue 
tax  has  been  paid,  there  shall  be  allowed  a  drawback  equal  in  amount 
to  the  tax  found  to  have  been  paid  on  the  alcohol  so  used ;  Provided, 
That  no  other  than  domestic  tax-paid  alcohol  shall  have  been  used 
in  the  manufacture  or  production  of  such  preparations.  Such  draw- 
back shall  be  determined  and  paid  under  such  rules  and  regulations, 
and  upon  the  filing  of  such  notices,  bonds,  bills  of  lading  and  other 
evidence  of  payment  of  tax  and  exportation,  as  the  Secretary  of  the 
Treasury  shall  prescribe. 

That  the  provisions  of  this  section  shall  apply  to  materials  used  in 
the  construction  and  equipment  of  vessels  built  for  foreign  account 
and  ownership,  or  for  the  government  of  any  foreign  country,  not- 
withstanding that  such  vessels  may  not  within  the  strict  meaning 
of  the  term  be  articles  exported. 


Federal  Reserve  Act 

Those  sections  of  the  Federal  Reserve  Act  which  have  an 
important  bearing  on  foreign  trade  are  quoted  below: 


422  APPENDIX 

Section  14 

Any  Federal  reserve  bank  may,  under  rules  and  regulations  pre- 
scribed by  the  Federal  Reserve  Board,  purchase  and  sell  in  the  open 
market,  at  home  or  abroad,  either  from  or  to  domestic  or  foreign 
banks,  firms,  corporations,  or  individuals,  cable  transfers  and  bankers' 
acceptances  and  bills  of  exchange  of  the  kinds  and  maturities  by  this 
act  made  eligible  for  rediscount,  with  or  without  the  indorsement  of 
a  member  bank. 

Every  Federal  reserve  bank  shall  have  power: 

(a)  To  deal  in  gold  coin  and  bullion,  at  home  or  abroad,  to  make 
loans  thereon,  exchange  Federal  reserve  notes  for  gold  coin  or  gold 
certificates,  and  to  contract  for  loans  of  gold  coin  or  bullion,  giving 
therefore,  when  necessary,  acceptable  security,  including  hypothe- 
cation of  United  States  bonds  or  other  securities  which  Federal  re- 
serve banks  are  authorized  to  hold; 

(b)  To  buy  and  sell,  at  home  or  abroad,  bonds  and  notes  of  the 
United  States,  and  bills,  notes,  revenue  bonds,  and  warrants  with 
a  maturity  from  date  of  purchase  not  exceeding  six  months,  issued 
in  the  anticipation  of  the  collection  of  taxes  or  in  anticipation  of  the 
receipt  of  assured  revenues  by  any  State,  county,  district,  political 
subdivision,  or  municipality  in  the  continental  United  States,  includ- 
ing irrigation,  drainage,  and  reclamation  districts,  such  purchases 
to  be  made  in  accordance  with  rules  and  regulations  prescribed  by  the 
Federal  Reserve  Board. 


(e)  To  establish  accounts  with  other  Federal  reserve  banks  for 
exchange  purposes  and,  with  the  consent  or  upon  the  order  and  direc- 
tion of  the  Federal  Reserve  Board  and  under  regulations  to  be  pre- 
scribed by  said  board,  to  open  and  maintain  accounts  in  foreign 
countries,  appoint  correspondents,  and  establish  agencies  in  such  coun- 
tries wheresoever  it  may  be  deemed  best  for  the  purpose  of  pur- 
chasing, selling,  and  collecting  bills  of  exchange,  and  to  buy  and 
sell,  with  or  without  its  endorsement,  through  such  correspondents  or 
agencies,  bills  of  exchange  (or  acceptances)  arising  out  of  actual  com- 
mercial transactions  which  have  not  more  than  ninety  days  to  run, 
exclusive  of  days  of  grace,  and  which  bear  the  signature  of  two 
or  more  responsible  parties,  and  with  the  consent  of  the  Federal 
Reserve  Board  to  open  and  maintain  banking  accounts  for  such  foreign 
correspondents  or  agencies 


APPENDIX  423 

Section  25 

Any  national  banking  association  possessing  a  capital  and  sur- 
plus of  $1,000,000  or  more  may  file  application  with  the  Federal  Re- 
serve Board  for  permission  to  exercise,  upon  such  conditions  and 
under  such  regulations  as  may  be  prescribed  by  the  said  board, 
either  or  both  of  the  following  powers : 

First.  To  establish  branches  in  foreign  countries  or  dependen- 
cies or  insular  possessions  of  the  United  States  for  the  furtherance 
of  the  foreign  commerce  of  the  United  States,  and  to  act  if  required 
to  do  so  as  fiscal  agents  of  the  United  States. 

Second.  To  invest  an  amount  not  exceeding  in  the  aggregate  ten 
per  centum  of  its  paid-in  capital  stock  and  surplus  in  the  stock  of 
one  or  more  banks  or  corporations  chartered  or  incorporated  under 
the  laws  of  the  United  States  or  any  State  thereof,  and  principally 
engaged  in  international  or  foreign  banking,  or  banking  in  a  depen- 
dency or  insular  possession  of  the  United  States  either  directly,  or 
through  the  agency,  ownership,  or  contract  of  local  institutions  in  for- 
eign countries,  or  in  such  dependencies  or  insular  possessions 


Work  of  the  Bureau  of  Foreign  and  Domestic 

Commerce 

Among  the  most  important  agencies  in  this  country  for  the 
development  of  foreign  trade  is  the  governmental  Bureau  of 
Foreign  and  Domestic  Commerce.  Its  purposes  and  aims  are 
set  forth  in  the  following  statement  issued  by  the  Bureau: 

The  Bureau  of  Foreign  and  Domestic  Commerce  has  three  prin- 
cipal sources  from  which  it  obtains  trade  information  from  foreign 
countries. 

Consular  Service.  The  United  States  Government  maintains 
abroad  nearly  300  consular  officers  and  in  addition  many  agencies. 
These  consular  officers  furnish  the  Bureau  a  great  fund  of  informa- 
tion relating  to  the  trade  of  their  districts,  including  annual  reviews 
of  commerce,  special  reports  called  for  by  the  Department  of  Com- 


424  APPENDIX 

merce,  lists  of  importers,  notices  of  bids  for  contract  work,  requests 
of  merchants  to  be  placed  in  communication  with  American  exporters, 
etc. 

Commercial  Agents.  Most  of  these  men  are  taken  from  active 
work  in  some  particular  industry  or  some  special  branch  of  com- 
merce and  are  experts  in  their  respective  lines.  They  travel  widely 
and  make  reports  as  to  methods  of  manufacture  and  special  require- 
ments in  the  lines  that  they  are  investigating. 

Commercial  Attaches.  While  stationed  at  one  post  like  the 
consular  ofificer,  the  commercial  attache  is  free  to:  travel  within  the 
field  to  which  he  is  assigned.  He  has  but  one  function — the  facili- 
tation of  commerce  between  the  United  States  and  the  country  to 
which  he  is  assigned.  Each  attache  speaks  the  language  of  the 
country  in  which  he  is  located  and  is  thoroughly  conversant  with  its 
commercial  usages. 

In  addition  the  Bureau  receives  numerous  official  and  other  pub- 
lications from  foreign  countries,  which  are  utilized  in  answering  re- 
quests for  information.  It  also  avails  itself  of  trade  journals  pub- 
lished in  this  country  and  of  the  assistance  of  commercial  organi- 
zations. 

Publications 

Information  collated  by  the  Bureau  of  Foreign  and  Domestic 
Commerce  is  distributed  chiefly  through  its  publications,  which  in- 
clude a  daily  trade  journal  and  monthly,  quarterly,  annual,  and  special 
bulletins. 

Announcements  of  specific  opportunities  for  the  sale  of  American 
goods  abroad  and  other  matters  of  a  confidential  character  are  fur- 
nished only  to  American  firms,  through  the  "Trade  Opportunity" 
service  and  the  confidential  bulletins  and  circulars  of  the  Bureau. 

Commerce  Reports,  a  daily  journal,  contains  articles  submitted 
by  consular  officers  and  commercial  agents  of  the  Department  of 
Commerce  and  trade  information  from  other  sources.  It  is  the  organ 
through  which  current  information  on  foreign  trade  matters  is  dis- 
tributed to  American  business  men.  It  is  sold  by  the  Superintendent 
of  Documents,  Government  Printing  Office,  Washington,  D.  C,  for 
$2.50  per  year,  and  subscriptions  are  also  received  at  the  district 
offices.  The  annual  reports  of  consular  officers,  formerly  published 
in  this  daily  journal,  are  now  issued  as  supplements  to  it  and  are 
mailed  to  all  subscribers  to  Commerce  Reports. 


APPENDIX  425 

Monthly  Summary  of  Foreign  Commerce  gives  the  imports  and 
exports  of  the  United  States  by  articles,  quantities,  and  values  for  the 
month  of  issue  and  for  the  accumulated  period  of  the  year  ending 
with  the  month  of  issue,  with  comparative  figures  for  corresponding 
periods  in  the  two  preceding  years.  It  is  sold  by  the  Superintendent 
of  Documents  for  15  cents  per  copy,  or  $1.50  a  year. 

Imports  Entered  for  Consumption,  which  is  issued  quarterly, 
gives  a  detailed  statement  of  the  quantity  and  value  of  imports  into 
the  United  States,  the  rates  of  duty,  and  the  amount  of  duty  col- 
lected. It  is  sold  by  the  Superintendent  of  Documents  for  75  cents 
a  year;  single  copies,  15  to  25  cents. 

Commerce  and  Navigation,  an  annual  volume  of  about  900  quarto 
pages,  gives  detailed  statistics  of  the  foreign  trade  of  the  United 
States,  stating  the  countries  to  which  each  article  or  class  of  articles 
was  exported  and  from  which  each  article  or  class  of  articles  was 
imported  during  a  five-year  period.  It  is  sold  by  the  Superintendent 
of  Documents. 

Statistical  Abstract  of  the  United  States,  an  annual  volume  of 
about  800  pages,  contains  a  condensed  statement  of  the  commerce, 
production,  industries,  population,  finance,  currency,  and  wealth  of 
the  country,  with  summary  statements  of  the  commerce  of  the  prin- 
cipal foreign  countries.  It  is  sold  by  the  Superintendent  of  Docu- 
ments for  50  cents. 

Bulletins  on  Special  Subjects 

Special  bulletins  published  by  the  Bureau  embrace  a  wide  range 
of  subjects.  Some  present  a  survey  of  the  entire  world's  markets 
for  certain  lines  of  goods ;  others  contain  an  intensive  study  of  par- 
ticular fields  and  particular  lines ;  still  others  furnish  a  general  study 
of  some  country  or  group  of  countries. 

Bulletins  have  been  issued  on  the  cotton  goods  trade  of  almost 
every  country  in  the  world;  other  bulletins  deal  with  cottonseed  oil, 
lumber,  shoes  and  leather,  machine  tools,  paints  and  varnishes,  motor 
vehicles,  musical  instruments,  canned  goods,  etc. 

Special  handbooks  have  been  issued  on  Australia,  New  Zealand, 
Russia,  South  America,  Dominican  Republic,  Canada,  Alaska,  Hawaii, 
and  the  Philippines,  British  India,  etc.  Still  other  special  publica- 
tions deal  with  such  subjects  as  foi'eign  credits,  packing,  and  trans- 
portation rates. 


426  APPENDIX 

Trade  Directories 

Trade  directory  work  is  an  important  branch  of  the  Bureau's 
service  to  American  exporters.  In  191 1  was  issued  a  "World  Trade 
Directory,"  giving  the  names  of  importers  in  all  countries  of  the 
world.  This  volume  is  now  out  of  print,  but  may  be  consulted  at 
the  district  offices,  which  also  have  the  revised  lists  that  are  con- 
stantly  being  received   from   consular  officers. 

In  1914  the  Bureau  issued  a  revision  of  the  South  American 
section  of  the  directory  (428  pages),  with  a  uniform  classification 
of  dealers  and  importers.  This  can  be  bought  from  the  Superinten- 
dent of  Documents. 

A  revision  of  the  directory  of  Central  America  and  the  West 
Indies  is  published  and  others  will  be  taken  up  later. 

The  district  offices  of  the  Bureau  have  on  hand  American  trade 
directories  and  directories  of  foreign  countries  that  will  prove  of 
material  assistance  to  exporters. 

Trade  Opportunity  Service 

Announcements  of  specific  opportunities  for  the  sale  of  American 
goods  abroad  are  published  in  Commerce  Reports.  The  names  and 
addresses  of  the  foreign  importers  desiring  the  goods  are  not  given  in 
these  announcements,  but  are  furnished  to  bona  fide  American  firms 
upon  application  to  the  Bureau  at  Washington  or  to  any  of  the  dis- 
trict offices. 

In  applying  for  such  names  and  addresses  the  inquirer  need  refer 
only  to  the  number  of  the  announcement  as  published  in  the  daily. 
A  separate  application  on  the  firm's  letterhead  should  be  made  for 
each  "opportunity"  desired. 

When  the  confidential  information  furnished  regarding  an  oppor- 
tunity for  sales  in  foreign  countries  is  too  detailed  to  be  given  in  a 
"Trade  Opportunity"  announcement,  it  is  embodied  in  a  confidential 
bulletin  or  circular,  which  is  sent  to  firms  that  are  listed  in  the  Trade 
Index  files  maintained  by  the  Bureau  and  its  district  offices. 

Samples,  specifications,  etc.,  that  accompany  reports  by  consular 
officers  and  commercial  agents  are  sent  to  the  district  offices  for 
lirtiited  periods  and  can  be  inspected  by  those  interested. 

Foreign  Trade  Information 

The  Division  of  Foreign  Tariffs  has  on  file  the  customs  tariff's 
of  all  foreign  countries,  usually  in  official  editions,  and  the  customs 


APPENDIX  427 

laws,  regulations,  and  decisions  of  the  principal  countries  of  the 
world.  It  also  receives  the  official  gazettes  of  most  foreign  countries, 
so  that  the  tariff  information  distributed  by  the  Bureau,  either  in 
the  form  of  special  tariff  publications  or  by  correspondence,  is  derived 
largely   from  official   sources. 

The  Bureau  is  equipped  to  answer  inquiries  in  regard  to  rates 
of  duly,  customs  regulations,  mternal  revenue  taxes,  license  fees  for 
commercial  travelers  and  customs  treatment  of  their  samples,  con- 
sular regulations,  and  commercial  agreements  of  foreign  countries. 

In  addition  to  publishing  translations  of  foreign  customs  tariffs 
and  special  compilations  of  rates  of  duty  on  groups  of  products  in 
all  foreign  countries,  the  Bureau  gives  notice  of  current  tariff  changes, 
as  well  as  proposed  changes,  through  the  foreign  tariff  notes  in 
Commerce  Reports.  These  notes  are  assembled  quarterly  and  pub- 
lished under  the  title  of  Foreign  Tariff  Notes.  The  other  tariff  pub- 
lications of  the  Bureau  are  known  as  "Tariff'  Series." 

In  writing  for  information  in  regard  to  foreign  rates  of  duty,  it  is 
necessary  to  give  a  detailed  description  of  the  article  involved  and  to 
specify  the  particular  country  or  countries  for  which  tariff  information 
is  desired.  It  is  advisable  to  confine  inquiries  to  information  needed 
immediately  rather  than  to  ask  for  comprehensive  statements  for  fu- 
ture reference,  which  may  be  out  of  date  by  the  time  they  are  used. 

While  the  district  offices  of  the  Bureau  of  Foreign  and  Domestic 
Commerce  are  supplied  with  the  tariff  publications  issued  by  the 
Bureau,  they  are  not  in  a  position  to  give  authoritative  information 
in  regard  to  foreign  tariffs.  Tariff  inquiries  should  therefore,  when- 
ever possible,  be  addressed  to  the  main  office  in  Washington. 

A  collection  of  foreign  trade-mark  and  patent  laws  is  now  being 
made  up  by  the  Bureau  of  Foreign  and  Domestic  Commerce  for  the 
purpose  of  answering  inquiries  in  regard  to  those  subjects. 

The  District  Office  Can  Help 

District  offices  of  the  Bureau  of  Foreign  and  Domestic  Com- 
merce were  established  to  expedite  the  distribution  of  commercial 
information,  to  ascertain  the  needs  of  the  business  men  of  the  coun- 
try, and  to  establish  closer  co-operation  between  Government  and 
private  agencies  interested  in  the  extension  of  foreign  trade. 

Each  district  office  has  on  file  confidential  information  regarding 
trade  opportunities,  lists  of  importers  in  foreign  countries,  trade 
directories,  etc. 


428  APPENDIX 

Each  district  office  receives  specifications,  samples,  exhibits, 
etc.,  for  a  Hmited  time,  and  these  may  be  inspected  by  interested 
persons. 

Each  district  office  arranges  conferences  between  exporters  and 
consular  officers  and  commercial  agents  when  the  latter  visit  district 
offices  during  leave  of  absence  in  this  country. 

Each  district  office  makes  a  special  study  of  the  needs  of  the 
district  in  which  it  is  located,  and  the  Bureau  endeavors  to  equip 
each  of  its  districts  to  meet  the  demands  peculiar  to  their  fields. 

Each  district  office  keeps  on  file  all  publications  of  the  Bureau, 
as  well  as  publications  of  other  branches  of  the  Government,  that  will 
be  of  assistance  to  American  exporters.  Each  office  acts  as  sales 
agent  for  the  Superintendent  of  Documents,  Washington,  D.  C,  for 
the  sale  of  the  Bureau's  publications. 

The  Bureau  of  Foreign  and  Domestic  Commerce  is  the  American 
business  man's  bureau  and  is  able  and  ready  to  serve  your  interests. 

Suggestions  to  Exporters 

Visit  or  write  the  district  office  in  your  district  and  learn  what 
it  has  and  what  it  can  do  for  you. 

Get  your  name  on  the  Trade  Index,  so  you  will  receive  the 
Bureau's  confidential  information  on  foreign  trade. 

Build  up  a  library  of  publications  on  your  line  of  business.  The 
Government  will  furnish  you  its  publications  at  cost,  and  in  them 
you  may  find  the  solution  to  some  of  your  business  problems. 

Subscribe  for  Commerce  Reports,  so  you  may  able  to  get 
promptly  the  announcements  of  opportunities  for  the  sale  of  goods 
in  foreign  lands  and  to  keep  inform.ed  concerning  commercial  and 
industrial  conditions  the  world  over.  Subscriptions  (at  $2.50  per 
year)  will  be  received  at  the  district  offices,  or  may  be  sent  direct 
to  the  Superintendent  of  Documents,  Washington,  D.  C. 

Write  the  district  office  about  your  export  problems.  The  Bureau 
through  its  districts  aims  to  meet  your  needs,  to  serve  your  interests. 
The  more  it  knows  about  your  problems,  the  more  effectively  it  can 
assist  you. 

Consult  the  district  office  in  your  district  before  addressing  re- 
quests for  information  to  American  consular  officers.  Frequently 
the  Bureau  and  its  district  offices  have  on  file  just  the  information 
you  desire.     Thus  you  will  save  time  and  expense. 

Make  arrangements  with  the  Bureau  or  its  district  offices  for 


APPENDIX  429 

conferences  with  consular  officers  and  commercial  agents.  These 
officials  can  furnish  you  information  of  great  value.  You,  in  turn, 
can  aid  them  in  making  their  work  more  effective. 

Participate  with  the  commercial  organizations  to  which  you 
belong  in  the  work  of  the  Bureau  of  Foreign  and  Domestic  Commerce 
and  its  district  offices.  Every  commercial  association  can,  by  co- 
operation with  the  Bureau,  prove  an  effective  agency  in  the  develop- 
ment of  American  trade  in  foreign  countries. 

Consult  the  district  office  in  your  district  concerning  your  plans 
for  entering  the  foreign  trade  field.  From  it  you  can  ascertain  what 
countries  are  the  largest  importers  of  the  articles  you  produce,  and 
what  countries  are  now  supplying  the  demand,  where  American  ex- 
porters in  your  line  have  met  with  success,  the  usual  conditions  as 
to  credits,  packing,  etc. 


Work  of  the  Office  of  Foreign  Trade  Advisers 

> 

The   chief   duties   of   the   Office   of   the   Foreign   Trade 

Advisers  of  the  Department  of  State  are: 

1.  To  control  and  direct,  under  the  supervision  of  the  appropriate 
executive  officers  of  the  Department,  the  commercial  work  of  the 
diplomatic  and  consular  services  ; 

2.  To  attend  to  correspondence  and  other  miscellaneous  business 
of  the  Department  relating  primarily  to  trade; 

3.  To  gather  information  and  formulate  advice  on  commercial 
subjects  for  the  use  of  the  Secretary  and  other  officers  of  the  Depart- 
ment. 

The  control  and  direction  of  the  commercial  work  of  the  diplo- 
matic and  consular  services  involve  the  drafting  of  instructions 
relating  to  the  activities  of  diplomatic  and  consular  officers  in  behalf 
of  American  trade,  the  acknowledgment,  filing  and  indexing  of  their 
reports,  the  consideration  of  these  reports  and  their  transmission 
after  editing  to  private  inquirers  and  to  the  governmental  depart- 
ments interested,  including  the  Department  of  Commerce  for  possible 


430  APPENDIX 

publication  in  Commerce  Reports.    These  reports  constitute  the  great 
bulk  of  the  material  published  in  this  daily. 

The  commercial  work  of  the  diplomatic  service  has  largely  to  do 
with  representations  to  the  central  authorities  of  foreign  countries 
in  an  endeavor  to  obtain  for  American  commercial  interests  equitable 
or  more  favorable  treatment.  For  example,  since  the  outbreak  of 
the  war  European  countries  have  forbidden  the  exportation  of  many 
important  articles  of  commerce  with  a  resultant  interference  to 
American  industry  and  trade  which  in  particular  instances  has  been 
of  a  most  serious  nature.  Other  belligerent  measures  aimed  to  stop 
enemy  trade  overseas  have  had  a  similarly  adverse  effect  on  the 
economy  of  the  United  States.  It  has  fallen  to  the  Office  of  the 
Foreign  Trade  Advisers  to  advise  the  Department  in  reference  to 
the  many  instructions  to  American  diplomatic  missions  abroad  and 
notes  to  the  diplomatic  representatives  of  foreign  powers  in  the 
United  States  involved  in  negotiations  to  secure  an  amelioration  of 
these  conditions. 

The  situations  which  have  arisen  have  been  manifold.  A  British 
Order  in  Council  interfered  with  the  shipment  of  American  tobacco 
to  Germany  and  Austria-Hungary.  It  was  possible  to  secure  a 
removal  of  the  restrictions  imposed  with  the  immediate  result  of  an 
increase  in  the  prices  realized  by  American  tobacco  growers  for  their 
crops.  Owing  to  embargoes  ordered  by  Germany  and  Austria- 
Hungary  the  importation  of  sugar  beet  seed  became  impossible. 
Arrangements  were  carried  through  for  the  importation  of  15,000 
bags  under  an  exception  to  the  German  embargo  and  by  special 
arrangement  with  the  British  Government.  The  British  Government 
recently  placed  an  embargo  on  the  exportation  of  logwood  from 
Jamaica,  thereby  intensifying  the  shortage  of  dyestuffs  in  the  United 
States.  On  January  10,  1916,  the  embargo  was  raised  as  a  result 
of  representations  by  this  Government.  Other  recent  questions  of 
importance  requiring  diplomatic  action  have  related  to  the  importa- 
tion of  hemp  from  Italy,  of  tungsten  ore  from  Portugal,  argols  from 
France,  and  hides,  glycerine,  sodium  cyanide  and  a  large  number 
of  other  important  commodities  from  various  foreign  countries. 

The  commercial  work  of  the  consular  service  includes,  among 
other  activities,  the  preparation  of  reports  on  a  wide  range  of 
economic  subjects  and  the  answering  of  many  and  diverse  inquiries 
relating  to  commercial  matters  originating  with  business  houses  in 
the  United  States.     Both  the  reports  and  letters  pass  through  the 


APPENDIX  431 

Office  of  the  Foreign  Trade  Advisers  where  they  are  read,  indexed, 
edited,  and  sent  on  to  the  Departments  interested  and  inquirers.  In 
191 5,  28,641  reports  and  letters  were  transmitted  to  the  Department 
of  Commerce  alone  for  possible  publication  in  the  daily  issues  of 
Commerce  Reports. 

Another  important  activity  of  the  consular  service  is  the  report- 
ing of  opportunities  for  the  sale  of  American  goods  abroad.  Large 
numbers  of  reports  of  this  character  are  received  daily  from  consuls 
in  all  parts  of  the  world.  A  considerable  portion  come  by  cable. 
These  are  given  immediate  consideration  and  communicated  at  once 
to  the  Department  of  Commerce  for  possible  publication  in  Commerce 
Reports  or  in  the  form  of  special  confidential  circulars  addressed  to 
business  houses  known  to  be  interested. 

Reports  received  from  not  more  than  one-half  of  the  300  con- 
sulates in  the  American  service  show  that  during  a  period  of  about 
six  months  just  passed  American  exporters  obtained  foreign  business 
as  a  direct  result  of  the  activities  of  those  offices  amounting  to 
$23,000,000  in  cases  where  it  was  possible  to  state  the  value  of  the 
orders  obtained.  In  addition  there  were  other  orders  the  amounts 
involved  in  which  could  not  be  definitely  known,  representing  a  value 
probably  approximately  one-half  of  the  above  figure. 

The  miscellaneous  correspondence  of  the  Department  of  State 
relating  to  trade  originates  for  the  most  part  with  individuals  and 
firms  who  desire  to  extend  their  foreign  connections,  to  have  informa- 
tion on  particular  points  concerning  foreign  tariffs,  food  regulations, 
invoice  requirements,  embargoes,  etc.,  or  to  enlist  the  aid  and  pro- 
tection of  the  Government  in  respect  to  their  difficulties  with  foreign 
governmental  authorities.  In  order  to  comply  with  the  requests  con- 
tained in  these  letters  it  is  necessary  in  many  cases  to  send  written  or 
telegraphic  instructions  to  American  diplomatic  and  consular  officers. 
In  other  cases  the  information  desired  must  be  sought  from  the 
library  of  trade  publications  or  the  files  of  diplomatic  and  consular 
reports  and  despatches  already  in  the  Office.  The  services  of  the 
foreign  representatives  of  the  United  States  are  made  available  to  the 
public  in  this  way  by  the  Office  of  the  Foreign  Trade  Advisers  and 
private  inquirers  obtain  the  benefit  of  a  well-developed  commercial 
intelligence  service. 

The  work  of  the  Office  of  the  Foreign  Trade  Advisers  has 
undergone  an  enormous  increase  since  the  outbreak  of  the  present 
war.    By  an  Order  in  Council  of  March  11,  191 5,  the  British  Govern- 


432  APPENDIX 

ment  decreed  a  suspension  of  the  sea-borne  foreign  trade  of  Germany 
and  its  allies.    The  validity  of  this  measure  has  not  been  recognized 
by  the  United  States  and  is  still  the  subject  of  diplomatic  discussion. 
Pending  the  settlement  of  the  questions  involved,  it  was  arranged  that 
the  British  Government  should  issue  permits  to  individual  American 
importers  for  the  uninterrupted  shipment  to  the  United  States  from 
neutral  ports  of  particular  consignments  of  goods  of  German,  Austrian, 
or  Turkish  origin  purchased  or  ordered  prior  to  March  i,  1915.    The 
permits  are  issued  on  the  basis  of  applications  filed  with  the  British 
Embassy  at  Washington  through  the  Office  of  the   Foreign  Trade 
Advisers  acting  unofficially  as  the  representative  of  the  importers. 
Between  the  latter  part  of  September  and  November  i,  1915,  nearly 
1,400  of  these  applications  were   received.     The  total  value  of  the 
merchandise  involved  is  estimated  at  about  $40,000,000.     At  the  end 
of  191 5  nearly  one-half  of  this  had  been  released  for  shipment  to  the 
United    States    as    a    result   of   the    activity    of  the   Foreign   Trade 
Advisers'  Office. 

The  Office  of  the  Foreign  Trade  Advisers  is  frequently  requested 
by  the  Secretary  of  State  and  other  officers  of  the  Department  to 
prepare  memoranda  on  commercial  questions  arising  in  the  course 
of  the  Department's  business.  From  time  to  time  it  has  undertaken 
extensive  investigations,  as  when  tariff  reciprocity  with  Canada  was 
mooted  in  191 1.  At  present  the  Office  is  studying  business  conditions 
and  international  tariff  relations  with  a  view  to  safeguarding  and  pro- 
moting the  interests  of  the  United  States  in  the  profound  economic 
readjustments  which  it  is  expected  will  attend  the  conclusion  of  the 
present  war. 

The  library  of  the  Office  of  the  Foreign  Trade  Advisers  contains 
more  than  15,000  books  and  pamphlets  relating  to  foreign  treaties, 
customs  and  tariff  laws,  regulations  and  decisions,  commerce,  naviga- 
tion, and  industry  throughout  the  world.  It  is  probably  the  most 
complete  library  of  its  kind  in  existence,  as  American  diplomatic  and 
consular  officers  in  all  parts  of  the  globe  are  instructed  to  supply 
it  with  the  latest  statistical  and  other  publications  of  the  governments 
to  which  they  are  accredited.  Duplicate  copies  of  the  publications 
received  are  transmitted  from  time  to  time  to  other  Departments  of 
the  Government  which  it  is  thought  may  be  interested  in  the  subject 
matter. 

The  present  staff  of  the  Office  of  the  Foreign  Trade  Advisers 
embraces  the  Foreign  Trade  Adviser,  four  consular  officers  detailed 


APPENDIX 


433 


for  special  duty  in  the  Office,  one  attorney  and  one  special  agent 
handling  applications  for  British  permits,  thirteen  departmental  clerks, 
twelve  stenographers  and  two  messengers.  The  offices  are  in  the 
State  Department  Annex,  Washington,  D.  C. 


Federal  Trade  Commission — Rules  of  Practice 

The  following  rules  of  practice  were  adopted  June  17, 
191 5,  by  the  Federal  Trade  Commission. 

Sessions 

The  principal  office  of  the  Commission  at  Washington,  D.  C,  is 
open  each  business  day  from  9  a.m.  to  4:30  p.m.  The  Commission 
may  meet  and  exercise  all  its  powers  at  any  other  place,  and  may, 
by  one  or  more  of  its  members,  or  by  such  examiners  as  it  may 
designate,  prosecute  any  inquiry  necessary  to  its  duties  in  any  part 
of  the  United  States. 

Sessions  of  the  Commission  for  hearing  contested  proceedings 
will  be  held  as  ordered  by  the  Commission. 

Sessions  of  the  Commission  for  the  purpose  of  making  orders  and 
for  the  transaction  of  other  business,  unless  otherwise  ordered,  will 
be  held  at  the  office  of  the  Commission  at  Washington,  D.  C,  on  each 
business  day  at  10:30  a.m.  Three  members  of  the  Commission  shall 
constitute  a  quorum  for  the  transaction  of  business. 

All  orders  of  the  Commission  shall  be  signed  by  the  Secretary. 

Complaints 

Any  person,  partnership,  corporation,  or  association  may  apply 
to  the  Commission  to  institute  a  proceeding  in  respect  to  any  violation 
of  law  over  which  the  Commission  has  jurisdiction. 

Such  application  shall  be  in  writing,  signed  by  or  in  behalf  of 
the  applicant,  and  shall  contain  a  short  and  simple  statement  of  the 
facts  constituting  the  alleged  violation  of  law  and  the  name  and 
address  of  the  applicant  and  of  the  party  complained  of. 


434  APPENDIX 

The  Commission  shall  investigate  the  matters  complained  of  in 
such  application,  and  if  upon  investigation  it  shall  appear  to  the 
Commission  that  there  is  a  violation  of  law  over  which  the  Commis- 
sion has  jurisdiction,  the  Commission  shall  issue  and  serve  upon  the 
party  complained  of  a  complaint  stating  its  charges  and  containing 
a  notice  of  a  hearing  upon  a  day  and  at  a  place  therein  fixed  at  least 
40  days  after  the  service  of  said  complaint. 

Answers 

Within  30  days  from  the  service  of  the  complaint,  unless  such 
time  be  extended  by  order  of  the  Commission,  the  defendant  shall 
file  with  the  Commission  an  answer  to  the  complaint.  Such  answer 
shall  contain  a  short  and  simple  statement  of  the  facts  which  con- 
stitute the  ground  of  defense.  It  shall  specifically  admit  or  deny 
or  explain  each  of  the  facts  alleged  in  the  complaint,  unless  the 
defendant  is  without  knowledge,  in  which  case  he  shall  so  state,  such 
statement  operating  as  a  denial.  Answers  in  typewriting  must  be 
on  one  side  of  the  paper  only,  on  paper  not  more  than  Sy2  inches  wide 
and  not  more  than  11  inches  long,  and  weighing  not  less  than  16 
pounds  to  the  ream,  folio  base,  17  by  22  inches,  with  left-hand  margin 
not  less  than  ly^  inches  wide,  or  they  may  be  printed  in  10  or  12 
point  type  on  good  unglazed  paper  8  inches  wide  by  lo^/^  inches  long, 
with  inside  margins  not  less  than  i  inch  wide. 

Service 

Complaints,  orders,  and  other  processes  of  the  Commission  may 
be  served  by  anyone  duly  authorized  by  the  Commission,  either  (a)  by 
delivering  a  copy  thereof  to  the  person  to  be  served,  or  to  a  member 
of  the  partnership  to  be  served,  or  to  the  president,  secretary,  or 
other  executive  officer,  or  a  director,  of  the  corporation  or  association 
to  be  served;  or  (b)  by  leaving  a  copy  thereof  at  the  principal  office 
or  place  of  business  of  such  person,  partnership,  corporation,  or 
association  ;  or  (c)  by  registering  and  mailing  a  copy  thereof  addressed 
to  such  person,  partnership,  corporation,  or  association  at  his  or  its 
principal  office  or  place  of  business.  The  verified  return  by  the 
person  so  serving  said  complaint,  order,  or  other  process,  setting  forth 
the  manner  of  said  service,  shall  be  proof  of  the  same,  and  the  return 
post-office  receipt  for  said  complaint,  order,  or  other  process,  regis- 
tered and  mailed  as  aforesaid,  shall  be  proof  of  the  service  of  the 
same. 


APPENDIX  435 

Intervention 

Any  person,  partnership,  corporation,  or  association  desiring  to 
intervene  in  a  contested  proceeding  shall  make  application  in  writing, 
setting  out  the  grounds  on  which  he  or  it  claims  to  be  interested.  The 
Commission  may,  by  order,  permit  intervention  by  counsel  or  in 
person  to  such  extent  and  upon  such  terms  as  it  shall  deem  just. 

Applications  to  intervene  must  be  on  one  side  of  the  paper  only, 
on  paper  not  more  than  85^  inches  wide  and  not  more  than  11  inches 
long,  and  weighing  not  less  than  16  pounds  to  the  ream,  folio  base, 
17  by  22  inches,  with  left-hand  margin  not  less  than  13^2  inches  wide, 
or  they  may  be  printed  in  10  or  12  point  type  on  good  unglazed  paper 
8  inches  wide  by  lo^^  inches  long,  with  inside  margins  not  less  than 
I  inch  wide. 

Continuances  and  Extensions  of  Time 

Continuances  and  extensions  of  time  will  be  granted  at  the 
discretion  of  the  Commission. 

Witnesses  and  Subpoenas 

Witnesses  shall  be  examined  orally,  except  that  for  good  and 
exceptional  cause  for  departing  from  the  general  rule  the  Commission 
may  permit  their  testimony  to  be  taken  by  deposition. 

Subpoenas  requiring  the  attendance  of  witnesses  from  any  place 
in  the  United  States  at  any  designated  place  of  hearing  may  be  issued 
by  any  member  of  the  Commission. 

Subpoenas  for  the  production  of  documentary  evidence  (unless 
directed  to  issue  by  a  Commissioner  upon  his  own  motion)  will  issue 
only  upon  application  in  writing,  which  must  be  verified  and  must 
specify,  as  near  as  may  be,  the  documents  desired  and  the  facts  to 
be  proved  by  them. 

Witnesses  summoned  before  the  Conunission  shall  be  paid  the 
same  fees  and  mileage  that  are  paid  witnesses  in  the  courts  of  the 
United  States,  and  witnesses  whose  depositions  are  taken,  and  the 
persons  taking  the  same,  shall  severally  be  entitled  to  the  same  fees 
as  are  paid  for  like  services  in  the  courts  of  the  United  States. 

Depositions  in  Contested  Proceedings 

The  Commission  may  order  testimony  to  be  taken  by  deposition  in 
a  contested  proceeding. 


436  APPENDIX 

Depositions  may  be  taken  before  any  person  designated  by  the 
Commission  and  having  power  to  administer  oaths. 

Any  party  desiring  to  take  the  deposition  of  a  witness  shall  make 
application  in  writing,  setting  out  the  reasons  why  such  deposition 
should  be  taken,  and  stating  the  time,  when,  the  place  where,  and  the 
name  and  post-office  address  of  the  person  before  whom  it  is  desired 
the  deposition  be  taken,  the  name  and  post-office  address  of  the 
witness,  and  the  subject  matter  or  matters  concerning  which  the  wit- 
ness is  expected  to  testify.  If  good  cause  be  shown,  the  Commission 
will  make  and  serve  upon  the  parties,  or  their  attorneys,  an  order 
wherein  the  Commission  shall  name  the  witness  whose  deposition  is  to 
be  taken  and  specify  the  time  when,  the  place  where,  and  the  person 
before  whom  the  witness  is  to  testify,  but  such  time  and  place,  and 
the  person  before  whom  the  deposition  is  to  be  taken,  so  specified  in 
the  Commission's  order,  may  or  may  not  be  the  same  as  those  named 
in  said  application  to  the  Commission. 

The  testimony  of  the  witness  shall  be  reduced  to  writing  by  the 
officer  before  whom  the  deposition  is  taken,  or  under  his  direction, 
after  which  the  deposition  shall  be  subscribed  by  the  witness  and 
certified  in  usual  form  by  the  officer.  After  the  deposition  has  been 
so  certified  it  shall,  together  with  a  copy  thereof  made  by  such  officer 
or  under  his  direction,  be  forwarded  by  such  officer  under  seal  in  an 
envelope  addressed  to  the  Commission  at  its  office  in  Washington, 
D.  C.  Upon  receipt  of  the  deposition  and  copy  the  Commission  shall 
file  in  the  record  in  said  proceeding  such  deposition  and  forward  the 
copy  to  the  defendant  or  the  defendant's  attorney. 

Such  depositions  shall  be  typewritten  on  one  side  only  of  the 
paper,  which  shall  be  not  more  than  8j^  inches  wide  and  not  more 
than  II  inches  long  and  weighing  not  less  than  i6  pounds  to  the  ream, 
folio  base,  17  by  22  inches,  with  left-hand  margin  not  less  than 
ij^  inches  wide. 

No  deposition  shall  be  taken  except  after  at  least  6  days'  notice  to 
the  parties,  and  where  the  deposition  is  taken  in  a  foreign  country 
such  notice  shall  be  at  least  15  days. 

No  deposition  shall  be  taken  either  before  the  proceeding  is  at 
issue,  or,  unless  under  special  circumstances  and  for  good  cause 
shown,  within  10  days  prior  to  the  date  of  the  hearing  thereof  assigned 
by  the  Commission,  and  where  the  deposition  is  taken  in  a  foreign 
country  it  shall  not  be  taken  after  30  days  prior  tO'  such  date  of 
hearing. 


APPENDIX  437 

Documentary  Evidence 

Where  relevant  and  material  matter  offered  in  evidence  is 
embraced  in  a  document  containing  other  matter  not  material  or 
relevant  and  not  intended  to  be  put  in  evidence,  such  document  v^^ill 
not  be  filed,  but  a  copy  only  of  such  relevant  and  material  matter 
shall  be  filed. 

Briefs 

Unless  otherwise  ordered,  briefs  may  be  filed  at  the  close  of  the 
testimony  in  each  contested  proceeding.  The  presiding  Commissioner 
or  examiner  shall  fix  the  time  within  which  briefs  shall  be  filed  and 
service  thereof  shall  be  made  upon  the  adverse  parties. 

All  briefs  must  be  filed  with  the  Secretary  and  be  accompanied 
by  proof  of  service  upon  the  adverse  parties.  Fifteen  copies  of  each 
brief  shall  be  furnished  for  the  use  of  the  Commission,  unless  other- 
wise ordered. 

Application  for  extension  of  time  in  which  to  file  any  brief  shall 
be  by  petition  in  writing,  stating  the  facts  upon  which  the  application 
rests,  which  must  be  filed  with  the  Commission  at  least  5  days  before 
the  time  for  filing  the  brief. 

Every  brief  shall  contain,  in  the  order  here  stated : 

1.  A  concise  abstract,  or  statement  of  the  case. 

2.  A  brief  of  the  argument,  exhibiting  a  clear  statement  of  the 

points  of  fact  or  law  to  be  discussed,  with  the  reference  to 
the  pages  of  the  record  and  the  authorities  relied  upon  in 
support  of  each  point. 

Every  brief  of  more  than  10  pages  shall  contain  on  its  top  fly 
leaves  a  subject  index  with  page  references,  the  subject  index  to  be 
supplemented  by  a  list  of  all  cases  referred  to,  alphabetically  arranged, 
together  with  references  to  pages  where  the  cases  are  cited. 

Briefs  must  be  printed  in  10  or  12  point  type  on  good  unglazed 
paper  8  inches  by  10^/2  inches,  with  inside  margins  not  less  than 
I  inch  wide,  and  with  double-leaded  text  and  single-leaded  citations. 

Oral  arguments  will  be  had  only  as  ordered  by  the  Commission. 

Address  of  the  Commission 

All  communications  to  the  Commission  must  be  addressed  to 
Federal  Trade  Commission,  Washington,  D.  C,  unless  otherwise 
specifically  directed. 


APPENDIX  B 

DIPLOMATIC  REPRESENTATION,  PARCEL  POST 
COUNTRIES,  AND  SHIPPING  DISTANCES 

Foreign  Cities  in  Which  There  are  American 

Consulates 

Consular  officers  endeavor  to  maintain  and  promote  every 
rightful  interest  of  American  citizens  in  foreign  lands  and 
strive  to  procure  for  them  all  the  privileges  belonging  to  them 
by  reason  of  treaty  or  traditional  custom.  Thus  the  consul 
may  be  a  valuable  source  of  aid  and  advice  for  the  exporter 
and,  though  forbidden  by  law  to  act  as  agent  for  the  sale  of 
merchandise,  may  assist  the  American  merchant  in  many  im- 
portant ways.  Following  is  as  complete  and  accurate  a  list  of 
American  consulates  abroad  as  it  is  possible  to  publish  at  this 
time. 

The  consulates  formerly  maintained  in  the  countries  lately 
at  war  with  the  United  States  have  been  omitted.  Authentic 
and  up-to-date  information  concerning  consular  relationships 
with  our  late  adversaries  can  be  obtained  only  through  the 
State  Department  at  Washington,  D.  C. 


Argentine  Republic 

Brazil 

Buenos  Aires 

Bahia 

Rosario 

Para 

Austria-Hungary 

Pernambuco 

(No  consulate) 

Rio  de  Janeiro 

Belgium 

Santos 

(No  consulate) 

Sao  Paulo 

Bolivia 

Bulgaria 

La  Paz 

Sofia 

438 

APPENDIX 


439 


Chile 

Antofagasta 

Punta  Arenas 

Valparaiso 
China 

Amoy 

Antung 

Canton 

Changsha 

Chefoo 

Chungking 

Foochow 

Hankow 

Harbin 

Mukden 

Nanking 

Peking 

Shanghai 

Swatow 

Tientsin 

Tsinantu 
Colombia 

Barranquilla 

Cartagena 
Costa  Rica 

Port  Linion 

San  Jose 
Cuba 

Cienfuegos 

Habana 

Nuevitas 

Santiago  de  Cuba 
Denmark  and  Dominions 

Aalborg 

Copenhagen 

Esbjerg 

Odense 
Dominican  Republic 

Puerto  Plata 

Santo  Domingo 


Ecuador 

Guayaquil 
France  and  Dominions 

Algiers,  Algeria 

Bordeaux 

Brest 

Calais 

Cette 

Dakar,  Senegal 

Grenoble 

Guadeloupe,  West  Indies 

Havre 

La  Rochelle 

Limoges 

Lyon 

Marseilles 

Martinique,  West  Indies 

Nantes 

Nice 

Paris 

Rouen 

Saigon,  Fr.  Indo-China 

St.  Etienne 

St.  Nazaire 

St.  Pierre-Miquelon 

Tahiti,  Society  Islands 

Tananarivo,  Madagascar 

Tunis 
Germany 

(No  consulates) 
Great  Britain  and  Dominions 

Adelaide,  Australia 

Aden,  Arabia 

Auckland,  New  Zealand 

Barbados,  West  Indies 

Belfast,  Ireland 

Belize,  British  Honduras 

Birmingham,  England 

Bombay,  India 

Bradford,  England 


440 


APPENDIX 


Great  Britain  and  Dominions 

(Continued) 
Bristol,  England 
Cairo,  Egypt 
Calcutta,  India 
Calgary,  Alberta,  Canada 
Campbellton,  New  Brunswick 
Cape    Town,    Cape    of    Good 

Hope 
Cardiff,  Wales 
Charlottetown,  Prince  Edward 

Is. 
Colombo,  Ceylon 
Cork  (Queenstown),  Ireland 
Cornwall,  Ontario 
Dublin,  Ireland 
Dundee,  Scotland 
Dunfermline,  Scotland 
Durban,  Natal 
Edinburgh,  Scotland 
Fernie,  British  Columbia 
Fort  William,  Ontario 
Georgetown,  Guiana 
Gibraltar,   Spain 
Glasgow,  Scotland 
Halifax,  Nova  Scotia 
Hamilton,  Bermuda 
Hamilton,  Ontario 
Hong  Kong,  China 
Huddersfield,  England 
Hull,  England 
Johannesburg,  Transvaal 
Karachi,  India 
Kingston,  Jamaica 
Kingston,   Ontario 
Leeds,  England 
Liverpool,  England 
London,  England 
Madras,  India 
Malta,  Maltese  Islands 


Manchester,  England 
Melbourne,  Australia 
Mombasa,  Br.  East  Africa 
Moncton,  New  Brunswick 
Montreal,  Quebec 
Nairoli,  Br.  East  Africa 
Nassau,  N.  P.,  Bahamas 
Newcastle,  Australia 
Newcastle-on-Tyne,  England 
Niagara  Falls,  Ontario 
Nottingham,  England 
Ottawa,  Ontario 
Penang,  Straits  Settlement 
Plymouth,  England 
Port  Antonio.  Jamaica 
Port  Arthur,  Ontario 
Port  Elizabeth,  Cape  of  Good 

Hope 
Prescott,  Ontario 
Prince  Rupert,  Br.  Columbia 
Quebec,  Quebec 
Rangoon,  India 
Regina,  Canada 
Riviere  du  Loup,  Quebec 
St.  John,  New  Brunswick 
St.  John's,  Newfoundland 
St.  Stephens,  New  Brunswick 
Sarnia,  Ontario 
Sault  Ste.  Marie,  Ontario 
Sheffield,  England 
Sherbrooke,  Quebec 
Singapore,   Straits  Settlements 
Southampton,  England 
Stoke-on-Trent,  England 
Swansea,  Wales 
Sydney,  Australia 
Sydney,  Nova  Scotia 
Toronto,  Ontario 
Trinidad,  West  Indies 
Vancouver,  British  Columbia 


APPENDIX 


441 


Great  Britain  and  Dominions 
(Continued) 

Victoria,  British  Columbia 

Windsor,  Ontario 

Winnipeg,  Manitoba 

Yarmouth,  Nova  Scotia 
Greece 

Athens 

Patrac 

Saloniki 
Guatemala 

Guatemala 
Haiti 

Cape  Haitien 

Port  au  Prince 
Honduras 

Ceiba 

Puerto  Cortes 

Tegucigalpa 
Italy 

Catania 

Florence 

Genoa 

Leghorn 

Milan 

Naples 

Palermo 

Rome 

Turin 

Venice 
Japan 

Dalny,  Manchuria 

Kobe 

Nagasaki 

Seoul,  Chosen 

Shimonoseki 

Taihoku,  Taiwan 

Yokohama 
Kongo 

Boma 


Liberia 

Monrovia 
Mexico 

Acapulco,  Guerrero 

Aguascalientes,  Aguascalientes 

Chihuahua,  Chihuahua 

Ciudad  Juarez,  Chihuahua 

Durango,  Durango 

Ensanada,  Lower  Cal. 

Frontera,  Tabasco 

Guadalajara,  Jalisco 

Guaymas,  Sonora 

Manzanillo,  Colima 

Matamoros,  Tamaulipas 

Mazatlan,  Sinaloa 

Mexico,  Mexico 

Monterey,  Nuevo  Leon 

Nogales,  Sonora 

Nuevo  Laredo,  Tamaulipas 

Progreso,  Yucatan 

Salina  Cruz,  Oaxaca 

Saltillo,  Coahuila 

San  Luis  Potosi,  San  Luis  Po- 
tosi 

Tampico,  Tamaulipas 

Torreon,  Coahuila 

Vera  Cruz,  Vera  Cruz 
Morocco 

Tangier 
Netherlands  and  Dominions 

Amsterdam 

Batavia,  Java 

Curacao,  West  Indies 

Padang,  Sumatra 

Rotterdam 
Nicaragua 

Bluefields 

Corinto 
Norway 

Bergen 


442 


APPENDIX 


Norway  (Continued) 
Christiania 
Christiansand 
Stavanger 
Trondhjem 
Vardo 
Panama 
Colon 
Panama 
Paraguay 

Asuncion 
Persia 
Bushire 
Tabriz 
Teheran 
Peru 

Callao,  Lima 
Portugal  and  Dominions 
Fayal,  Azores 
Funchal,  Madeira 
Lisbon 
Lourenco  Marques,  East  Africa 

St.  Michael's,  Azores 
Russia 
Archangel 

Helsingfors,  Finland 

Irkutsk 

Kief 

Moscow 

Odessa 

Petrograd    (St.   Petersburg) 

Riga 

Tiflis,  Caucasus 

Vladivostok,  Siberia 

Warsaw 


Salvador 

San  Salvador 
Serbia 

Belgrade 

SlAM 

Bangkok 
Spain  and  Dominions 
Almeria 
Barcelona 
Bilbao 
Gijon 
Madrid 
Malaga 
Santander 
Seville 

Teneriffe,  Canary  Islands 
Valencia 
Vigo 
Sweden 

Gothenburg 

Helsingborg 

Malmo 

Stockholm 
Switzerland 

Basel 

Berne 

Geneva 

St.  Gall 

Zurich 
Uruguay 

Montevideo 
Venezuela 

La  Guaira 

Maracaibo 

Puerto  Cabello 


APPENDIX 


443 


Embassies  and  Legations  Maintained  Abroad  by  the 

United  States 

The  following  list  is  of  countries  in  which  the  United  States 
maintains  embassies  and  legations.  Those  countries  in  which 
the  representative  is  an  ambassador  extraordinary  and  pleni- 
potentiary are  indicated  by  italics.  The  remaining  represen- 
tatives are  envoys  extraordinary  and  ministers  plenipotentiary. 
Business  correspondence  to  representatives  in  the  first  class 
should  be  addressed  to  "American  Ambassador" ;  to  those  in 
the  latter  class  to  "American  Minister." 


Argentina  (Buenos  Aires) 

Bolivia  (La  Paz) 
Brazil  (Rio  de  Janeiro) 

Chile  (Santiago) 
China  (Peking) 
Colombia  (Bogota) 
Costa  Rica  (San  Jose) 
Cuba  (Habana) 

Denmark  (Copenhagen) 
Dominican    Republic     (San  Do- 
mingo City) 

Ecuador  (Quito) 

France  (Paris) 

Great  Britain  (London) 

Greece   (Athens — also  represents 

Montenegro) 
Guatemala  (Guatemala  City) 

Haiti  (Port  au  Prince) 
Honduras  (Tegucigalpa) 

Italy  (Rome) 

Japan  (Tokio) 


Luxemburg  (See  "Netherlands") 

Mexico  (Mexico  City) 
Montenegro  (See  "Greece") 

Netherlands    (The     Hague — also 

represents  Luxemburg) 
Nicaragua  (Managua) 
Norway  (Christiania) 

Panama  (Panama  City) 
Paraguay  (Asuncion) 
Persia  (Teheran) 
Peru  (Lima) 
Portugal  (Lisbon) 

Roumania  (Bucharest) 
Russia  (Petrograd) 

Salvador  (San  Salvador) 
Serbia  (See  "Roumania") 
Siam   (Bankok) 
Spain  (Madrid) 
Sweden  (Stockholm) 
Switzerland  (Berne) 

Uruguay  (Montevideo) 

Venezuela  (Caracas) 


In  the  first  two  of  the  following  countries  the  United  States 


444  APPENDIX 

is  represented  by  an  agent  and  consul-general,  and  in  the  third 
by  a  minister-resident  and  consul-general: 

Egypt  (Cairo) 
Morocco  (Tangiers) 
Liberia  (Moravia) 


Parcel  Post  Countries 

The  United  States  has  not  yet  concluded  parcel  post  con- 
nections with  all  countries,  yet  most  of  the  important  places 
in  the  world  may  be  reached  by  this  means.  Though  regula- 
tions concerning  the  shipment  of  goods  by  parcel  post  vary  in 
different  countries,  it  may  be  said  in  general  that  any  article 
admissible  to  the  domestic  mails  of  the  United  States  may  be 
sent  abroad  in  unsealed  packages  by  parcel  post.  The  parcel 
post  connections  with  the  countries  listed  below  include  most 
of  the  colonial  possessions  of  the  countries.  Specific  data 
concerning  any  particular  country  may  be  easily  obtained  by 
application  to  the  Post-Office  Department.  The  lists  of  parcel 
post  countries  is  as  follows: 

Argentina  Dominican  Republic 

Australia  Dutch  Guiana 

Bahamas  East  Indies 

Barbados  Ecuador 

Bermuda  France 

BoHvia  French  Guiana 

Brazil  Gibraltar 

British  Guiana  Great  Britain  (including  Ireland) 

China  Greece 

Colombia  Guatemala 

Costa  Rica  Guadaloupe 


APPENDIX  445 

Haiti  Newfoundland 

Honduras  (British)  New  Zealand 

Honduras  (Republic  of)  Nicaragua 

Hong  Kong  Panama 

Italy  Peru 

Jamaica  Salvador 

Japan  Siam 

Leeward  Islands  Society  Islands 

Liberia  Trinidad 

Martinique  Uruguay 

Manchuria  Venezuela 

Mexico  Windward  Islands 

Parcel  post  service  with  the  following  countries  has  been 
temporarily  suspended  on  account  of  conditions  arising  from 
the  war: 

Austria  Hungary 

Belgium  Netherlands 

Chile  Norway 

Denmark  Portugal 

Germany  Sweden 


Distances  From  New  York  to  Principal  Ports  of  the 

World 

These  distances  comprise  the  shortest  practicable  routes, 
and  are  given  in  nautical  miles.  To  convert  nautical  into 
statute  miles,  multiply  by  1.1516. 

Bahia 4,089      Boston  3^5 

Baltimore   404      Buenos  Aires 5-868 

Barbados    i  ,829      Callao    3-363 

Bermuda 681       Cape  Town   6,720 

Bombay 8,120      Charlestown    627 


446 


APPENDIX 


Charlottetown,  P.  E.  1 1,321 

Colon    1 ,974 

Georgetown   2,217 

Gibraltar    3-195 

Habana  1,186 

Halifax 596 

Hamburg    3,510 

Havre   3.219 

Hong  Kong 11,190 

Honolulu  (via  Panama)   . .   6,702 

Key  West 1,128 

Las  Palmas   2,965 

Liverpool    3,053 

London   3,222 

Manila  (via  Panama)   ....11,548 

Mobile  1,658 

Montevideo    5,768 

Melbourne   (via  Panama)  .  10,392 

Naples 4,155 

New  Orleans 1.730 

Newport  News  281 


Pernambuco 3,696 

Philadelphia   235 

Port  Castries i,747 

Portland   349 

Puerto  Mexico i,944 

Punta  Arenas   6,947 

Quebec    1,321 

Queenstown   2,904 

Rio  de  Janeiro 4,77° 

Saint  Thomas   i,434 

Saint  Vincent   2,914 

San  Francisco   (via  Pana- 
ma)      5,262 

San  Juan 1,407 

Savannah    700 

Shanghai  (via  Panama)   ..10,649 

Sydney  (via  Panama) 9,8ii 

Singapore  10,170 

Valparaiso  (via  Panama).  4,633 

Yokohama    9,798 


APPENDIX   C 

CURRENCY  AND  WEIGHT  EQUIVALENTS 


Foreign  Currency  Equivalents 


Value  of  For- 

Value of  U.  S. 

eign  Gold  Cur- 

Dollar at  Par 

Denomination 

rency    at    Par 

in     Terms     of 

in 

Terms     of 

Foreign    Gold 

U. 

S.  Dollar 

Currency 

Balboa  (Panama) 

$1,000 

1. 000  balboas 

Bolivar  (Venezuela) 

•193 

5.18  bolivares 

Boliviano  (Bolivia) 

•389 

2.57  bolivianos 

Colon  (Costa  Rica) 

•465 

2.15  colones 

Crown    (Austria) 

.203 

4.926  crowns 

Crown  (Denmark) 

.268 

3.731  crowns 

Dinar  (Serbia) 

•193 

5.18  dinars 

Dollar    (Mexico) 

.464 

2.15  dollars 

Dollar   (Newfoundland) 

1. 000 

1. 000  dollar 

Dollar   (Salvador) 

.972 

1.02  dollars 

Dollar  (Sts.  Settlements) 

-567 

1.764  dollars 

Dollar  (Elsewhere) 

1. 000 

1. 000  dollar 

Drachma   (Greece) 

•193 

5.18  drachmas 

Florin  or  Guilder  (Netherlands) 

.402 

2.487  florins 

Franc    (Belgium,    France, 

Swit- 

zerland) 

•193 

5.18  francs 

Gourde   (Haiti) 

•25 

4.000  gourdes 

K'ran  (Keran)    (Persia) 

.079 

12.646  k'ran 

Krone   (Denmark) 

.268 

3.731  kroner 

Leo   (Roumania) 

•193 

5.18  lei 

Lev  (Bulgaria) 

•193 

5.18  leva 

Lira  ^taly) 

•193 

5.18  lire 

Lira  Turca  or  Medjidie  (Turkey) 

44 

.227  pounds 

Mark  (Finland) 

•193 

5.18  marks 

Mark  (Germany) 

.238 

4.20  marks 

447 


448 

APPENDIX 

Val 

lue  of  For- 

Value  of  U.  S. 

eign  Gold  Cur- 

Dollar at   Par 

Denomination 

rency    at    Par 

in    Terms     of 

in 

Terms     of 

Foreign     Gold 

U. 

S.  Dollar  • 

Currency 

Milreis  (Brazil) 

•546 

1. 831  milreis 

Milreis  (Portugal) 

1.08 

.926  milreis 

Peseta   (Spain) 

•193 

5.18  pesetas 

Peso   (Argentina) 

■965 

1.037  pesos 

Peso   (Chile) 

•365 

2.74  pesos 

Peso  (Guatemala) 

.972 

1.02  pesos 

Peso  (Uruguay) 

1.034     . 

•977  pesos 

Pound  (Egypt) 

4-943 

.202  pounds 

Pound  (England) 

4.8665 

£0,  4s.,  ij4d. 

Ruble  (Russia) 

•515 

1. 941  rubles 

Rupee  (India) 

•3244 

3.086  rupees 

Sol  (Peru) 

•487 

2.053  sol 

Sucre  (Ecuador) 

.487 

2.053  Sucre 

Tael  (China) 

•703 

142  taels 

Tical  (Siam) 

.278 

3.597  ticals 

Yen   (Japan) 

498 

2.008  yen 

APPENDIX 


449 


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APPENDIX    D 

SUGGESTIVE  INVESTIGATION  CHARTS 

Investigator's  Instruction  Sheets 

The  investigator  of  a  foreign  market  will  minimize  the 
danger  of  overlooking  essential  sources  of  information  if  he  is 
provided  at  the  outset  with  standardized  instructions  which 
will  designate  all  the  different  kinds  of  sources  from  which  he 
will  ordinarily  be  expected  to  gather  his  facts. 

His  task  will  be  further  simplified  if  he  is  also  provided 
with  the  name  and  location  of  each  of  the  bureaus,  consular 
offices,  banks,  and  other  sources  which  he  is  expected  to  visit. 
To  these  he  will  be  able  to  add  other  sources  which  he  will  have 
visited  on  his  own  initiative  and  his  sheet  may  be  expanded 
indefinitely.  No  investigator  can  consider  his  work  completed 
until  he  has  exhausted  the  possibilities  of  more  than  one  source 
under  each  head. 

For  convenience  five  distinct  forms,  each  representing  the 
sources  of  the  different  classes  of  information  are  presented 
on  the  following  pages.  In  practice  a  single  combined  chart 
will  be  found  equally  effective. 


Investigator's  Analysis  Sheet 

The  next  step  is  to  supply  the  investigator  with  a  list  of  the 
topics  on  which  specific  information  is  required  and  to  tell  him 

453 


454 


APPENDIX 


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APPENDIX 


which  of  the  sources  on  his  instruction  sheet  may  be  expected 
to  supply  such  data.  This  Hst  of  topics  will  be  found  on  the 
"Investigator's  Analysis  Sheet"  which  follows,  with  the  prob- 
able sources  of  information  indicated  in  the  first  column  at 
the  right  of  the  topic.  The  information  itself  is  recorded 
in  the  second  column. 

To  illustrate:  The  first  specific  information  called  for  on 
the  analysis  sheet  is  the  "Nature  of  Demand."  The  United 
States  Department  of  Commerce  at  Washington  may  be  ex- 
pected to  tell  whether  the  demand  is  local  or  general  by  ref- 
erence to  its  consular  reports.  Mention  of  this  department  will 
be  found  on  the  investigator's  instruction  sheet — Classification 
B,  Column  I.  It  may  be  designated  on  the  analysis  sheet  as 
"  B  I." 

Since  the  American  consul  at  the  chief  seaport  of  the 
foreign  market  may  have  some  personal  information  which 
will  throw  light  on  this  same  incjuiry,  we  may  also  include 
him  as  a  source,  designating  him  as  "C  II." 


Investigator's  Analysis  Sheet 

I.  Demand 

(a)    Nature 

Source 

Information 

(b)    Quality 

(c)    Extent   (Quantity) 

(d)   Potential  (Latent) 

(e)    How  Best  Fostered 

(f)    How  Best  Created 

(g) 

(h) 

2.  Supply 

(a)    Nature 

(b)   Quality 

(c)    Extent 

Investigator's  Analysis  Sheet 


APPENDIX 


457 


2.  Supply  (Continued) 

(d)    Principal  Sources 

Source 

Information 

(e)    Is  There  Overproduction? 

(f) 

(g) 

3.  Structure  of  Market 

(a)    Machinery  of  Distribution 

(b)   Import  Policies 

(c)    Terms  of  Sale 

(d)   Credit  Conditions 

(e) 

(f) 

4.  Psychology  of  Market 

(a)    Stable  or  Changeable 

(b)   Reliable  or  Unreliable 

(c)   Attitude  of  Government 

(d)  Attitude  of  People 

(e) 

(f) 

5.  Status  of  Market 

(a)    Political 

(b)   Governmental 

(c)    Legal 

(d)   Economic 

(e)    Financial 

(f)    Social 

(g)   Commercial 

(h) 

(i) 

6.  Methods  of  Distribution 

(a)    Competitor's  Methods 

(b)   Criticisms 

(c)    Best  Method  for  This  Product 

(d) 

(e) 

Investigator's  Analysis  Sheet  (Continued) 


458 


APPENDIX 


7,  Terms  of  Sale 

(a)  Prices 

(b)  Margin  of  Profit 

(c)  Discount 

(d)  Commissions 

(e)  Credit  Customs 

(f) 
(g) 


8. 


Advertising 
(a)    Kinds 


(b) 
(c) 
(d) 
(e) 

(f) 
(g) 
(h) 
(i) 


Papers 

Cost 

Nature 

Extent 

Catalogues 

Circulars 


Capital  Required  for 

(a)  Advertising 

(b)  Agencies 

(c)  Sales 

(d)  Credits 

(e)  Organization 

(f)  Banks  (Am.  Foreign  Branches) 

(g) 
(h) 


Source 


Information 


10.  Tariff,  Transportation,  and  Miscel- 
laneous Commercial  Laws 

(a)  Tariff  Rates 

(b)  Best  Transportation  Routes 

(c)  Transportation  Rates 

(d)  Local  Requirements 

(e)  Consular  and  Shipping  Require- 

ments 


Investigator's  Analysis  Sheet  (Continued) 


APPENDIX 


459 


10.  Tariff,  Transportation,  and  Miscel- 
laneous Commercial  Laws  (Cont.) 

Source 

Information 

(0 

(g) 

II.  Miscellaneous  Information 

(a)    Packing  Rules 

(b)   Special  Production  Demands 

(c)    Principal  Competitors 

(d) 

(e) 

(f) 

Investigator's  Analysis  Sheet  (Continued) 


Investigator's  Summary  of  Analysis  Sheet  (for  the 

Executive) 

At  the  end  of  the  investigation  a  summary  of  the  analysis 
sheet  with  its  concise  comments  may  serve  as  a  handy  refer- 
ence device  for  the  executive. 

The  comment  on  this  sheet,  however,  must  be  supported  by 
detailed  and  comprehensive  reports  covering  the  entire  topic, 
indicating  all  sources  of  information  and  presenting  the  com- 
plete evidence  on  which  the  conclusion  arrived  at  by  the  in- 
vestigator has  been  based.  These  detailed  reports  may  be  con- 
sidered of  a  confidential  nature  and  should  be  kept  in  a  sep- 
arate file  where  they  are  available  for  the  use  of  the  executive 
only. 


460 


APPENDIX 


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APPENDIX  461 

Supplementary  Topics  for  Investigation 

The  following  subjects  may  profitably  be  treated  in  a  full 
supplementary  report  by  the  investigator.  They  cannot  readily 
be  put  into  the  chart  form,  but  may  constitute  an  important 
portion  of  the  investigation.  The  material  presented  here  is 
suggestive  in  character  rather  than  conclusive  in  any  sense. 

1.  In  Connection  With  the  Problem  of  Production 

(a)  Number  of  other  companies  in  the  field. 

(b)  Location  of  their  plants. 

(c)  Present  volume  of  production  in  this  particular  line. 

(d)  Availability  and  condition  of  raw  materials. 

(e)  Export  potentiality. 

2.  Legislation,     Regulations,    or    Industrial     Conditions    In- 

fluencing OR  Bearing  on  the  Commodity 

(a)  Climatic  conditions. 

(b)  Traffic  conditions. 

(c)  After-  and  pre-war  situations  as  affecting  this  particular 

commodity. 

(d)  Present    market    status — governmental,     geographic,     and 

legislative. 

(e)  Restrictions  on  or  aids  to  commerce. 

(f)  Pre-war  or  recent  lights  on  labor  in  all  industrial  fields. 

3.  Selling  Methods 

(a)  General  sales  conditions  in  this  particular  industry. 

(b)  Ways  and  means  used  by  competitive  manufacturers. 

(c)  Enterprise  and  service  suggestions. 

4.  Prices 

(a)  Quotations  of  competing  lines. 

(b)  Comparison  of  prices — as  to  better  or  lesser  rated  goods. 

5.  Distribution  Difficulties  and  Advantages 

(a)  Channels  of  distribution. 

(b)  Other  methods  of  distribution. 

(c)  Methods  of  overcoming  obstacles  to  distribution. 

(d)  Cheapening  the  processes  of  distribution. 


462  APPENDIX 

6.  Methods   of   Meeting    "Kicks"    or    "Unsatisfactory    Goods" 

Problem 

(a)  Plans  to  eliminate  poor  merchandise. 

(b)  Experience  others  have  had  in  perfecting  products. 

(c)  Packaging  and  retail  education. 

7.  Competition 

(a)  Briefs  of  leading  firms  in  the  industry. 

(b)  Status  of  their  goods  in  open  markets. 

(c)  Value  of  competitor's  goods  to  consumer. 

(d)  Strength  and  weakness  of  competitor's  methods. 

(e)  How  long  competitors  have  been  in  the  market. 

(f)  Similar  products  manufactured,  if  any. 

(g)  Retail  and  wholesale  price  of  similar  products. 

8.  Consumption 

(a)  Survey  of  per  capita  use. 

(b)  Zone  consumption  as  applied  naturally. 

(c)  Diagnosis  of  best  sellers  and  desirable  items. 

(d)  Statistical  table  of  consumption  by  years. 

(e)  Potential  purchasing  power  of  consuming  classes. 

(f)  Percentage  of  literate  and  illiterate  consumers. 

(g)  Characteristics  and  customs  peculiar  to  consuming  classes, 
(h)  Appeal  of  the  product — as  a  luxury  or  a  necessity. 

9.  Advertising 

(a)  How,  where,  when,  and  what  to  advertise. 

(b)  Possible  costs  and  relative  return  of  tentative  advertising. 

(c)  Competitor's  use  of  advertising. 

(d)  Comparison  of  window,  bill-board,  car,  newspaper,  maga- 

zine, special  device,  and  sampling  methods  of  publicity. 

(e)  Co-operation  of  press— general  or  only  through  advertising 

pages. 

(f)  Value  of  local  color. 

ID.  Trade-Mark  Value  and  Good-Will  Building 

11.  Future  Outlook  for  Industry  as  a  Whole 

12.  Trade-mark  and  Patent  Laws 


APPENDIX  E 

BIBLIOGRAPHY 

Practical  Exporting,  B.  Olney  Hough.  Johnson  Export  Publishing 
Co.,  New  York.     1918. 

American  Methods  in  Foreign  Trade,  George  C.  Vedder.  McGraw- 
Hill  Book  Co.,  New  York.     1919. 

Shipping  Office  Organization,  Management  and  Accounts,  Alfred 
Calvert.    Isaac  Pitman  &  Sons,  London.     1910. 

Marine  Insurance,  William  Gow.    The  Macmillan  Co.,  London.    1909. 

Exporters'  Handbook  and  Glossary,  Frank  M.  Dudley.  Isaac  Pit- 
man &  Sons,  New  York.     1916. 

Exporters'  Encyclopedia.  Exporters'  Encyclopedia  Co.,  New  York. 
(Published  yearly.) 

Industrial  and  Commercial  Geography,  J.  Russell  Smith.  Henry  Holt 
&  Co.,  New  York.     1913. 

A  Text-Book  of  Commercial  Geography,  C.  C.  Adams.  D.  Appleton 
&  Co.,  New  York.     1918. 

Theory  of  International  Trade,  C.  F.  Bastable.  The  Macmillan  Co., 
London.     1903. 

The  Principles  and  Practice  of  Commerce,  James  Stephanson.  G.  P. 
Putnam's  Sons,  London.     191 5. 

International  Finance,  H.  Withers.  E.  P.  Button  &  Co.,  New  York. 
1916. 

Foreign  Exchange  and  Foreign  Bills,  W.  F.  Spalding.  Isaac  Pitman 
&  Sons,  London.     1918. 

Elements  of  Foreign  Exchange  (Revised  edition),  Franklin  Escher. 
Bankers'  Publishing  Co.,  New  York.     1917. 

Modern  Foreign  Exchange,  V.  Gonzales.  C.  S.  Hammond  &  Co., 
New  York.    1914. 

The  Law  of  Commercial  Paper,  W.  U.  Moore.  D.  Appleton  &  Co., 
New  York.     1918. 

Ocean  Traffic  and  Trade,  Olney  B.  Hough.  LaSalle  Extension  Uni- 
versity, Chicago.     1914. 

Principles  of  Ocean  Transportation,  Emory  R.  Johnson  and  G.  G. 
Huebner.    D.  Appleton  &  Co.,  New  York.     1918. 

463 


464 


APPENDIX 


History  and  Economics  of  Transportation,  A.  W.  Kirkaldy.     Isaac 

Pitman  &  Sons,  New  York.     191 5. 
The  Ocean  Carrier,  J.  Russell  Smith.     G.  P.  Putnam's  Sons,  New 

York.     1908. 
Exporting  to  Latin  America,  E.  B.  Filsinger.     D.  Appleton  &  Co., 

New  York.     1916. 
Dictionary  of  World's   Commercial   Products,   J.   A.   Slater.     Isaac 

Pitman  &  Sons,  New  York.     1912. 

There  are  many  valuable  pamphlets  concerning  the  various  aspects 
of  foreign  trade  published  by  certain  organizations.  Among  the  most 
important  of  tris  type  which  may  be  mentioned  are  the  publications  of: 

The  Bureau  of  Foreign   and  Domestic   Commerce,   Department  of 

Commerce,  Washington,  D.  C. 
The  Department  of  State,  Washington,  D.  C. 
Foreign  Departments  of  Banks. 


APPENDIX   F 

GLOSSARY 

A.  A.  R.  "Against  all  risks."  Insurance  term  equivalent  to  "With 
Average"  and  opposed  to  "F.  P.  A." 

Acceptance.  Admission  of  liability  and  engagement  to  pay  by  drawee 
of  after-sight  or  after-date  draft;  effected  by  drawee's  signing 
his  name,  the  date,  and  the  amount  across  the  face  of  the 
draft. 

Bank.  Draft  by  shipper  on  bank  with  which  importer  has 
established  credit.  It  is  accepted  by  bank  and  is  then  negotiable. 
The  bank  which  acts  thus  may  be  in  country  of  destination  or  in 
country  of  export. 

Trade.  An  unconditional  order  in  writing  addressed  by  one 
person  to  another,  signed  by  the  person  giving  it,  requiring  the 
person  to  whom  it  is  addressed  to  pay  at  a  fixed  or  determinable 
future  time  a  certain  sum  in  money  to  the  order  of  a  specified 
person.  The  bill  must  be  drawn  by  the  seller  on  the  purchaser 
of  goods  sold,  and  accepted  by  such  purchaser.  (Definition  by 
Federal  Reserve  Board.) 

Act  of  God.    See  "Force  Majeure." 

Agio.  Difference  between  the  real  and  the  nominal  value  of  money. 
When  paper  currency  is  depreciated,  the  agio  represents  the 
premium  at  which  gold  stands  as  compared  with  paper. 

American  Exposition.  A  permanent  exhibition  of  American  goods 
in  a  central  city  of  the  foreign  country.  Experiments  in  Caracas 
and  Shanghai  are  failures.  The  idea  of  such  an  exposition  main- 
tained by  American  exporters  has  been  repeatedly  advocated  but 
with  little  success. 

Arbitrage.  Buying  securities  or  produce  in  one  market  and  at  the 
same  time  instructing  agents  in  another  market  by  telegraph  to 
sell  them.  By  this  manipulation  a  profit  is  made  due  to  the  dif- 
ference in  price. 

Average.     See  "General  Average,"  "F.  P.  A.,"  and  "W.  A." 

Average  Bond.  Agreement  signed  by  shippers  liable  for  contributions 
to  a  general  average  adjustment.     By  it  they  receive  cargo  for 

465 


466  APPENDIX 

a  promise  to  pay  general  average  as  soon  as  ascertained.     See 
"General  Average." 

Barratry  of  the  Master  and  Mariners.  Any  wrongful  act  com- 
mitted by  the  master  or  crew  of  a  vessel  to  the  prejudice  of  the 
owner  or  charterer.  If  the  owner  connives,  the  act  is  not 
barratry  but  fraud. 

Bill  of  Exchange.    See  "Draft." 

Bill  of  Lading.  Steamship  or  railway  company's  receipt  for  goods 
shipped  over  its  route.  Possession  of  a  bill  of  lading  properly 
drawn  to  a  shipper's  own  order  or  to  a  specifically  named  con- 
signee conveys  corresponding  ownership  of  the  goods  represented 
by  it.  It  is  not  a  negotiable  instrument  in  the  strict  sense — 
though  negotiable  bill  of  lading  is  a  common  term — because  the 
holder,  even  though  he  take  it  in  good  faith  and  for  value,  has  no 
better  title  than  the  transferrer  had.  Frequently  the  bill  of 
lading  must  be  certified  to  by  the  consul  of  the  country  to  which 
the  shipment  is  made. 

Clean.  One  against  which  the  shipping  company  has  not 
noted  flaws  in  the  packing  of  all  or  part  of  the  shipment. 

Direct.  One  which  is  made  to  consignee  instead  of  to 
shipper's  order.  The  consignee  takes  title  to  the  shipment  as  soon 
as  it  is  placed  in  the  custody  of  the  shipping  company. 

Foul.  One  against  which  the  shipping  company  has  noted 
flaws  in  packing. 

Negotiable.  One  which  has  been  indorsed  by  the  shipper, 
if  the  bill  is  made  to  shipper's  own  order,  or  which  lacks  the 
stamp  "Copy,  non-negotiable,"  if  the  bill  is  made  directly  to 
consignee. 

Order.  One  which  is  made  out  to  shipper's  own  order, 
instead  of  directly  to  consignee.  The  bill  will  be  delivered  to 
consignee  only  upon  fulfilment  by  him  of  conditions  set  forth 
by  shipper  in  his  instructions  to  his  banker.  Shipper  holds  title 
until  the  documents  are  delivered  to  the  buyer. 

Bonded  Warehouse.  Place  sanctioned  by  customs  authorities  for 
deposit  of  goods  without  payment  of  duties  until  they  are  removed. 

Bottomry  Bond.  Document  given  by  the  captain  of  a  ship  in  order 
to  get  money  for  immediate  repairs.  Payment  for  the  bond  is 
enforcible  only  if  the  ship  reaches  port  safely  and  when  the 
consideration  has  been  of  benefit. 

C.  A.  F.    "Cost  and  freight."    Same  as  "C.  F."  and  "C.  &  F."    Terms 


'&■ 


APPENDIX  467 

quoted  C.  A.  F.  include  cost  and  freight.  The  abbreviation  ought 
not  to  be  used  for  fear  of  confusion  with  "Cost,  assurance, 
freight." 

Cambist.  One  who  exchanges  foreign  money  or  deals  in  foreign 
notes  or  bills  of  exchange. 

Cash  on  Delivery  of  Documents.  A  C.  O.  D.  transaction.  Cash 
may  be  paid  shipper  on  delivery  of  shipping  documents  to  the 
purchaser's  bank  in  the  country  of  export  or  when  documents 
are  delivered  to  purchaser,  in  which  case  payment  may  be  made 
by  a  bank  in  the  country  of  destination. 

Certificate  of  Origin.  Statement  that  goods  in  question  are  the 
product  or  manufacture  of  the  United  States  and  of  no  other 
country.  It  must  be  made  before  the  consul  of  the  country  to 
which  goods  are  shipped  and  certified  to  by  him.  When  consular 
invoices  are  required  at  the  point  of  entry,  these  serve  the  same 
purpose — to  control  tariff  treatment. 

C.  F.    "Cost  and  freight,"  same  as  "C.  A.  F." 

Charter  Party.  Lease  or  contract  made  with  the  owner  of  a  vessel, 
whether  it  be  for  a  trip  or  for  a  period,  for  cargo  or  for  passen- 
gers. 

Chicaneurs.  Persons  habitually  inclined  to  take  advantage  of  every 
technicality. 

C.  I.  F.    "Cost,  insurance,  freight." 

C.  I.  F.  &  E.     "Cost,  insurance,  freight,  and  exchange." 

Clearance.     See  "Shipper's  Manifest." 

Colonial  Clause.  This  clause  is  attached  to  drafts  on  South 
African  and  Australasian  points.  It  requires  that  drawee  pay 
exchange  (plus  English  and  Colonial  stamps)  at  the  current 
rate  in  London  for  negotiating  bills  on  the  Colonics.  In  New 
York  the  exchange  between  New  York  and  London  only  is 
calculated. 

Confirmed  Credit.  Letter  from  an  American  bank  which  has  been 
authorized  by  a  foreign  house  (buyer)  to  pay  an  American 
manufacturer  (seller)  a  certain  sum  under  definite  conditions. 
The  bank  confirms  this  credit  by  writing  to  the  seller  and  stating 
the  sum  and  the  conditions  on  which  it  is  instructed  to  pay;  the 
seller  is  sure  of  his  money  if  he  complies  with  the  terms  men- 
tioned. 

Consignee.  One  to  whom  goods  are  shipped.  This  is  the  broadest 
definition.     More  specifically,  the  term  is  used  of  one  to  whom 


468 


APPENDIX 


goods   are   sent   at   the   shipper's   risk — one   who  does   not   buy 
outright. 

Constructive  Total  Loss.  A  loss  in  which  the  property,  though 
damaged  only  slightly,  is  of  no  value  to  the  owner. 

Consular  Documents.  See  "Bill  of  Lading,"  "Certificate  of  Origin," 
"Consular  Invoice,"  and  "Non-Dumping  Certificate." 

Consular  Invoice.  Detailed  statement  regarding  the  character  of 
the  goods  shipped.  Frequently  it  nmst  be  prepared  in  the  lan- 
guage of  the  country  to  which  the  shipment  is  made  and  always 
it  must  be  certified  by  the  consul  at  the  port  of  exit.  The  blanks 
for  consular  invoices  can  usually  be  obtained  at  the  consulate, 
where  they  are  sold  by  the  set  at  a  small  price. 

Countervailing  Duty.  Customs  tax  placed  on  imports  so  as  to 
place  them  on  a  parity  with  domestic  goods  which  pay  an  excise 
tax. 

Credit.  See  "Confirmed  Credit,"  "Irrevocable  Credit,"  and  "Letter 
of  Credit." 

Custom  House  Clearance.     See  "Shipper's  Manifest." 

CwT.  Hundredweight:  112  lbs.  in  the  British  system,  which  is  com- 
monly used. 

D.  A.  Documents  for  acceptance;  instructions  of  shipper  to  banker 
to  deliver  bill  of  lading  when  buyer  accepts  the  draft.  The  other 
course  is  to  instruct  "D.  P.,"  that  is,  "documents  for  payment  of 
draft" 

Del  Credere.  If  an  agent  securing  an  order  guarantees  payment,  he 
is  a  del  credere  agent  and  his  additional  commission  for  this 
guaranty  is  a  del  credere  commission. 

Demurrage.  Penalty,  agreed  to  in  charter,  to  be  paid  by  charterers 
of  a  ship  to  owners  when  the  vessel  is  delayed  beyond  the 
agreed-upon  number  of  lay  days,  that  is,  days  for  loading  and 
unloading. 

Discount. 

Commercial.  An  allowance  from  the  quoted  price  of  goods, 
made  usually  by  taking  off  a  certain  percentage  from  the  invoice 
price.  Commercial  discount  may  be  a  trade  discount,  that  is, 
an  allowance  made  to  tradespeople,  as  for  instance  to  whole- 
salers buying  in  large  lots,  or  it  may  be  a  cash  discount  given  for 
the  payment  of  the  account  within  a  stated  period. 

Financial.  Deductions  from  the  face  value  of  commercial 
paper,  such  as  bills  of  exchange,  in  consideration  of  receiving 


APPENDIX  469 

cash  before  due  date.  For  instance,  when  the  holder  of  a  bill 
of  exchange  is  desirous  of  obtaining  money  for  it,  instead  of 
waiting  until  the  due  date  of  payment  arrives,  he  sells  his  bill  at 
a  price  less  than  its  face  value  and  for  the  consideration  received 
he  parts  with  all  the  rights  of  ownership  in  the  paper.  The  rates 
of  discount  vary  according  to  the  state  of  the  money  market, 
the  financial  standing  of  the  persons  on  whom  the  bill  is  drawn 
or  who  are  parties  to  the  bill,  and  other  circumstances 
surrounding  the  transaction. 

Dishonor.  Refusal  on  the  part  of  the  person  on  whom  the  draft  is 
drawn  to  accept  the  same  or  to  pay  after  the  draft  has  been  ac- 
cepted, or  a  refusal  to  pay  a  draft  on  the  date  when  it  falls  due 
and  is  presented  for  payment.     See  also  "Protest." 

Dollar  Exchange.  Opposed  to  sterling  exchange.  Exchange  is 
now  regularly  quoted  in  pounds  sterling,  and  the  quotation  in 
dollars  is  not  likely  ever  to  take  the  place  of  sterling  exchange. 

D.  P.  Documents  for  payment ;  instructions  of  shipper  to  banker  to 
deliver  bill  of  lading  only  when  draft  has  been  paid.  Opposed  to 
"D.  A.' 

Draft. 

Bill  of  Exchange.  An  unconditional  order  in  writing  signed 
by  the  person  giving  it  and  requiring  the  person  to  whom  it  is 
addressed  (on  whom  it  is  drawn)  to  pay  on  demand  or  at  a  fixed 
date  a  definite  sum  to  the  order  of  a  specific  person  or  bearer. 
Foreign  drafts  are  almost  invariably  accompanied  by  shipping 
documents  which  insure  that  the  order  to  pay  will  be  honored 
or  that  the  sum  can  be  recovered  on  the  goods  covered  in  the 
shipping  order.     Hence  they  are  readily  negotiable. 

Clean.  Acceptance  by  importer  of  seller's  draft,  in  the 
same  manner  as  domestic  trade  acceptances. 

Documentary.  One  accompanied  by  shipping  documents 
to  insure  that  these  will  not  be  surrendered  until  the  buyer  has 
met  the  terms  of  the  draft. 

Drawback.  Refund,  paid  to  a  manufacturer  by  the  United  States 
government,  of  99  per  cent  of  duties  on  material  entering  into 
the  making  of  goods  for  export.  The  manufacturer  receives  the 
drawback  whether  or  not  he  was  the  importer.  A  claim  must 
be  filed  with  the  collector  of  customs  at  the  port  of  exportation 
before  the  goods  are  actually  shipped.  Rules  and  regulations 
regarding  this  matter  can  be  obtained  from  the  United  States 


470 


APPENDIX 


Department  of  the  Treasury,  Washington,  D.  C,  or  from  an 
attorney  speciaHzing  in  this  matter.  The  law  of  drawback 
appears  in  Appendix  A. 

Dumping.  Practice  of  throwing  goods  on  a  foreign  market  at  cut 
rates  in  order  to  diminish  an  oversupply  in  the  domestic  market 
and  thus  maintain  prices.     See  "Non-Dumping  Certificate." 

Endorsement.    See  "Indorsement." 

E.  &   O.    E,      "Errors   and   omissions    excepted,"    phrase    prefacing 

shipper's  signature  on  invoice. 

F.  A.  S.     "Free  alongside"   (vessel).     The  seller  delivers  the  goods 

alongside  on  a  lighter  or  on  the  receiving  pier,  but  the  quotation 
excludes  extra  loading  charges  which  may  be  due  to  the  unusual 
weight  of  the  shipment.     Such  charges  are  then  on  buyer. 

F.  O.  B.  "Free  on  board."  Shipper  assumes  all  charges  until 
shipment  is  on  vessel,  but  none  thereafter.  The  following  varia- 
tions of  this  term  are  used,  but  are  confusing  and  ought  to  be 
avoided. 

F.  O.  B.  Destination.  Seller  pays  all  costs  and  assumes 
all  risks  until  the  goods  reach  the  place  of  delivery  agreed 
upon. 

F.  O.  B.  Factory.  Goods  will  be  placed  free  on  railroad 
cars  at  factory. 

F.  O.  B.  New  York.  Shipper  assumes  railroad  charges  to 
New  York,  but  not  lighterage  or  cartage  there. 

Force  Majeure.  Act  of  God.  A  fortuitous  event  which  comes 
without  design,  foresight,  or  expectation.  If  a  contract  does 
not  provide  exception  due  to  force  majeure,  British  and  American 
courts  hold  the  seller  liable,  but  continental  courts  do  not. 

F.  P.  A.  "Free  of  particular  average."  To  avoid  petty  claims, 
insurance  policies  on  goods  slightly  damaged  in  the  course  of  a 
voyage  provide  that  no  claim  shall  be  paid  unless  it  amounts  to  a 
certain  percentage  of  the  value  of  such  articles.  This  percentage 
is  known  as  the  franchise.  F.  P.  A.  is  opposed  to  "A.  A.  R." 
and  to  "W.  A." 

General  Average.  All  loss  arising  out  of  a  voluntary  sacrifice 
(jettison)  made  of  any  part  of  the  ship  or  cargo  to  prevent  loss 
of  the  whole  or  to  rescue  the  whole  adventure  from  unusual 
peril.  This  loss  is  apportioned  over  all  shippers  on  the  vessel, 
even  the  lost  cargo  bearing  its  share.  Until  this  assessment  is 
paid,  a  lien  lies  against  the  goods. 


APPENDIX  471 

Go-Downs.  Bankers'  warehouses  in  which  they  keep  goods  until 
consignee  discharges  his  obligation. 

Gross  Weight.  Weight  of  the  package  as  shipped.  It  is  important 
to  differentiate  gross,  legal,  and  net  weight  because  of  the  customs 
requirements  of  the  various  countries.  Moreover,  each  country 
will  have  its  own  definition  of  these  terms.  It  will  therefore  be 
advisable  to  consult  the  tariff  act  of  each  country  to  which 
shipments  are  made. 

Hundredweight.    See  "Cwt." 

Hypothecation.  A  draft  drawn  by  shipper  is  offered  to  bankers 
who  hypothecate  it,  that  is,  advance  cash  to  drawer  (minus 
interest  and  commissions)  and,  taking  bills  of  lading  as  security, 
wait  to  collect  from  drawee.  In  some  cases,  banks  require  a 
letter  of  hypothecation  setting  forth  their  rights  to  sell  goods  in 
case  drawee  does  not  pay,  or  to  reinsure  in  case  cargo  is  insuffi- 
ciently insured,  etc.  Such  letters,  however,  are  not  required  in 
law. 

In  Case  of  Need.  Shippers  doing  a  large  business  at  a  given  foreign 
port  instruct  their  bankers  to  apply,  in  case  of  a  protested  draft 
or  acceptance,  to  some  agent  of  the  shippers  who  will  not 
necessarily  take  up  the  paper  but  will  make  arrangements  for 
it.  The  phrase  is  the  regular  form  used  in  notification  to  the 
bankers  of  the  name  and  address  of  the  agent. 

Inconvertible  Paper  Currency.  Paper  money  which  cannot  be 
accepted  at  face  value. 

Indent.  A  list  of  goods  sent  by  the  overseas  buyer  to  his  agent 
abroad  for  purchase  to  the  best  advantage.  Usually  it  is  an 
order  given  to  a  commission  house  by  its  customer  abroad. 

Indent  Merchant.  Solicits  orders  on  basis  of  sample  or  catalogue, 
puts  through  consolidated  order,  and  apportions  goods  when 
received  on  basis  of  individual  orders.  Never  buys  on  owti 
account. 

Indorsement.  A  signature  on  the  back  of  an  instrument,  whether 
it  is  a  bill  of  exchange,  a  promissory  note,  or  other  negotiable 
paper.  An  indorsement  is  made  primarily  for  the  purpose  of 
transferring  the  rights  of  the  holder  to  some  other  person.  It 
is  a  contract  between  the  holder  and  all  the  parties  to  the 
instrument.  Each  indorser,  by  his  indorsement,  does  two  things : 
he  orders  the  antecedent  parties  to  pay  to  his  indorsee ;  he  also 
agrees  with  the  indorsee  that  if  they  do  not  pay,  he  will. 


472  APPENDIX 

In  Blank.  One  in  which  only  the  name  of  the  indorser  is 
written. 

In  Full.  One  in  which  mention  is  made  of  the  indorsee. 
"Pay  to  the  order  of  John  Smith,"  followed  by  the  signature  of 
the  indorser,  is  the  general  form  of  the  indorsement  in  full. 

Irrevocable  Credit.  Term  arising  from  war  conditions  and  perhaps 
not  in  permanent  use.  Meaning  varies.  Generally  same  as  "Con- 
firmed Credit,"  except  that  shipper  has  indefinite  time  in  which  to 
present  his  shipping  documents. 

Jettison.  Throwing  overboard  part  of  the  cargo  or  equipment  of  a 
ship  in  order  to  save  the  rest  from  marine  disaster.  For  insurance 
provisions  in  such  a  case  see  also  "General  Average." 

Legal  Weight.  Weight  of  the  goods  themselves,  plus  their  immedi- 
ate containers,  as  cartons,  etc.  Each  country  will,  however, 
define  gross,  legal,  and  net  weight  in  its  own  fashion  in  its  tariff 
laws.  Reference  should  therefore  be  made  to  the  law  of  each 
country  to  which  shipments  are  made. 

Letter  of  Advice.  Letter  of  financial  and  shipping  advice.  State- 
ment sent  by  shipper  to  customer,  informing  him  of  ship  used,  in- 
surance arrangements,  and  draft  drawn. 

Letter  of  Assurance.  Permission  from  a  government  to  ship  a 
given  cargo  to  a  given  country.  This  requirement  is  a  result 
of  war  conditions.  It  was  first  applied  to  shipments  from  the 
United  States  to  the  Scandinavian  countries,  for  which  British 
permission  was  required. 

Letter  of  Credit.  In  international  trade  this  term  has  a  different 
meaning  from  the  usual  one.  It  is  an  order  given  by  a  person 
in  one  place  authorizing  the  banker  in  another  place  to  pay  a 
specified  person  a  certain  sum  on  the  delivery  of  certain  docu- 
ments or  the  performance  of  certain  conditions.  The  authoriza- 
tion may  be  addressed  to  the  payee  advising  him  that  he  may 
draw  on  the  bank  under  the  conditions  stated.  In  either  case  this 
type  of  letter  of  credit  is  called  "documentary,"  as  distinguished 
from  the  usual  form  called  an  "open  letter  of  credit"  used  by 
salesmen,  travelers,  etc.  The  documentary  letter  of  credit  is 
used  when  an  importer  is  buying  goods  in  a  country  where  he 
is  not  known.  Through  the  letter  he  opens  an  account  in  a 
bank  of  the  country  where  the  seller  resides  and  the  bank  is 
instructed,  under  the  terms  of  the  letter,  to  honor  all  bills  and 
drafts  upon  the  depositor  by  the  seller,  if  certain  documents  of 


APPENDIX  473 

title  to  the  goods  named  are  sent  to  the  bank  with  the  draft.  In 
this  way  the  seller  is  secured  from  the  time  the  order  is  given 
and  the  buyer  may  be  specially  benefited  as  the  goods  can  be 
examined  before  they  are  paid  for. 

Letter  of  Indemnity.  Certificate  given  steamship  company  by 
shipper  to  avoid  a  foul  bill  of  lading.  It  agrees  that  no  claim 
will  be  entered  by  shipper  for  damage  to  any  article  which  the 
company  finds  improperly  packed. 

Letter  of  Lien.  Consignee's  admission  of  bank's  claim  to  title  in 
goods.  In  exchange  for  this  letter  the  consignee  receives  the 
shipping  documents  and  is  enabled  to  get  the  goods. 

Lighterage.  Cost  of  loading  or  unloading  a  vessel  by  means  of 
barges  bringing  goods  alongside  vessel. 

Free.  Term  indicating  that  shipper  assumes  cost  of  lighters 
if  required  in  ihe  foreign  harbor.  As  applied  to  export  ship- 
ments from  the  interior  of  the  United  States  to  New  York,  the 
term  means  that  railroad  rates  quoted  on  carload  lots  of  most 
goods  include  cost  of  putting  goods  alongside  vessel.  In  this  use 
lighterage  includes  cartage  and  ferriage. 

Lloyds,  Corporation  of.  An  association  of  about  400  London 
underwriters,  who  underwrite,  that  is,  sign,  insurance  policies 
for  all  kinds  of  marine  and  other  unusual  risks.  Often  this 
underwriting  is  done  jointly,  from  5  to  10  underwriters  signing 
for  a  definite  share  of  the  risk.  The  pre-eminent  position  of 
Lloyds  is  due  to  the  remarkably  complete  system  of  information 
maintained  by  the  association,  which  has  its  agents  in  every 
part  of  the  globe  and  collects  every  kind  of  information  of  use 
to  marine  insurance  agents. 

Manifest.    See  "Shipper's  Manifest." 

Marine  Insurance  Policy.  A  contract  of  indemnity  by  which  the 
insurance  company  engages  for  a  certain  sum  payable  in  advance 
to  refund  the  amount  of  loss  arising  from  such  casualty  as  may 
be  insured  against.  Marine  insurance  is  more  extensive  than 
other  kinds  because  it  may  provide  not  merely  for  losses  arising 
from  fire,  but  from  piracy,  wreck,  and  generally  all  injuries 
sustained  at  sea.  There  are  a  number  of  different  policies  or 
contracts  of  marine  insurance.  The  ordinary  policy  excludes 
claims  for  damages  on  certain  kinds  or  classes  of  goods,  which 
must  be  specially  insured.  See  "F.  P.  A.,"  "General  Average," 
"W.  A." 


474  APPENDIX 

Net  Weight.  Weight  of  the  articles  unpacked,  or  in  their  immediate 
containers.  In  connection  with  weights,  reference  should  be 
made  to  the  tariff  laws  of  each  country  to  verify  the  definitions. 

Non-Dumping  Certificate.  Statements,  required  by  certain  British 
colonies,  to  the  effect  that  the  prices  and  discounts  shown  on 
invoices  are  those  obtaining  in  the  country  of  the  seller.  If  this 
is  not  the  case,  then  the  open  market  price  and  the  usual  discount 
for  the  quantity  in  question,  if  sold  at  home,  must  be  stated 
in  columns  parallel  to  those  showing  export  prices  and  discounts. 

Notify  Clause  in  Order  Bills  of  Lading.  Requests  delivering 
steamship  agent  to  notify  consignee  of  arrival  of  goods,  which 
are  of  course  not  delivered  to  consignee  until  he  can  present 
bill  of  lading  properly  indorsed.  A  similar  request  to  notify  is 
sometimes  made  of  a  steamship  agent  at  transshipping  point 
in  order  that  consignee  may  learn  approximate  arrival  date. 

Open  Policy  of  Insurance.  Contract  between  the  insurance  com- 
pany issuing  the  same  and  the  shipper,  by  which  the  insurance 
company  binds  itself  to  protect  by  insurance,  in  accordance  with 
the  conditions  of  the  policy,  all  shipments  made  by  the  insured. 
This  is  done  automatically  from  the  moment  the  shipment  leaves 
the  factory,  store,  or  warehouse  at  initial  shipping  point.  The 
policy  remains  in  force  continuously  until  goods  are  delivered 
to  the  factory,  store,  or  warehouse,  at  destination.  It  is  required 
that  the  assured  shall  report  all  shipments  to  the  insurance 
company  as  soon  as  practicable,  and  at  the  end  of  each  month 
pay  the  premium  on  the  shipments  reported  in  accordance  with 
the  schedule  of  rates  attached  to  the  policy. 

Parcel  Receipt.  Receipt  issued  by  a  steamship  company  when  small 
packages  are  shipped,  usually  containing  samples.  The  goods 
shipped  on  "parcel  receipt"  are  kept  apart  from  the  general 
cargo  and  can  be  had  by  the  consignee  immediately  on  the 
arrival  of  the  ship.     Some  countries  require  consular  invoices. 

Parity.  Prices  of  American  securities  as  quoted  on  the  London 
Stock  Exchange,  expressed  in  dollars. 

Particular  Average.     See  "F.  P.  A."  and  "W.  A." 

Perils  of  the  Sea.  It  is  these  that  a  simple  marine  policy  insures 
against.  They  include  only  such  losses  as  are  directly  due  to 
being  at  sea,  and  not  all  of  these ;  wear  and  tear  at  sea  and  other 
foreseeable  losses  are  excluded,  as  are  deterioration  to  perishable 
goods,  breakage,  leakage,  and  robbery. 


APPENDIX  475 

Per  Procuration  Signature.  Signature  of  an  authorized  agent  for 
his  principal.  Legally,  such  signature  is  valid  only  to  the  extent 
of  the  authorization,  but  generally  it  is  regarded  as  indicating 
that  full  authority  covering  all  points  has  been  given. 

Primage.  Originally  a  present  to  master  and  crew,  now  simply  an 
addition  to  the  rates  quoted  by  the  steamship  companies.  This 
addition  stated  in  the  quotation,  is  5  or  10  per  cent  of  the  rate 
mentioned.     The  practice  is  dying  out. 

Produce  Exchange.  Market  for  exchange  of  goods  or  produce, 
corresponding  to  stock  exchange.  An  exchange  differs  from 
ordinary  markets  in  that  goods  are  not  on  viewi  nor  even 
necessarily  owned  by  seller  at  time  of  sale.  Only  goods  which 
are  gradable  and  capable  of  being  sold  in  large  quantities  are 
suited  for  sale  on  a  produce  exchange. 

Protest.  A  formal  statement  in  writing  by  a  notary  that  a  bill  of 
exchange  or  a  promissory  note  has  been  presented  for  payment, 
that  the  same  has  been  refused,  and  that  all  parties  to  the  instru- 
ment will  be  held  responsible.  The  practice  abroad  is  to  send 
a  dishonored  bill  to  a  notary  on  the  day  when  payment  was 
refused.  The  notary  then  again  presents  the  bill  to  the  drawee, 
or  to  the  acceptor  for  acceptance  or  payment,  as  the  case  may  be, 
and  if  it  is  again  rejected  the  notary  then  notes  the  facts  on  the 
bill  or  a  slip  of  paper  which  he  signs  and  attaches  to  the  bill. 
Subsequently  the  official  certificate  of  protest  is  issued  by  the 
notary  and  attached  to  the  dishonored  bill.  The  next  step  is  to 
notify  all  indorsers  that  the  bill  has  been  dishonored. 

Salvage.  Compensation  allowed  persons  by  whose  voluntary  exer- 
tions a  vessel,  her  cargo,  or  the  lives  of  those  belonging  to  her 
are  saved  from  danger  or  loss  in  case  of  wreck,  capture,  or  other 
marine  disaster.  Termed  legally  "civil  salvage"  as  distinguished 
from  "military  salvage"  which  is  the  rescue  of  property  from  the 
enemy. 

Seignorage.  The  profit  made  by  a  government  on  the  coining  of 
bullion  into  money. 

Shipper's  Manifest — Custom  House  Clearance.  An  instrument 
in  writing  containing  a  true  account  of  the  individual  shipment 
or  of  the  cargo  of  the  ship.  It  must  contain  a  list  of  all  packages 
or  separate  items  of  freight  with  their  distinguishing  marks, 
numbers,  value,  etc.  It  should  be  made  out  in  accordance  with 
the  official  instructions  at  the  custom  house  and  sworn  to  by  the 


476  APPENDIX 

owner,  shipper,  or  consignor  in  person,  or  by  a  duly  authorized 
agent.     A  copy  of  the  "clearance,"  as  the  manifest  is  sometimes 
called,  should  be  given  to  the  steamship  company  which  files  it 
with  the  ship's  manifest  at  the  custom  house.     One  copy  at  least 
should  be  kept  by  the  shipper  himself. 
Shipping    Permit.      Certificate    issued    by    the    steamship    company 
through  which  foreign  shipment  is  to  be  made.     It  indicates  the 
place  where  and  the  dates  when  goods  are  to  be  delivered  to  the 
steamer. 
Shipping  Receipt.     Receipt  given  by  shipper  to  steamship  company 
in  exchange  for  bills  of  lading.     Such  companies  as  require  them 
will  usually  supply  forms. 
Ship's  Protest.     Declaration  under  oath  of  a  captain  of  a  vessel, 
setting  forth  the  circumstances  under  which  damage  to  ship  or 
cargo  was  suffered. 
Sight  Draft  with  Documents.    Irrevocable  credit. 
Special  Permit.     Receipt  issued  by  steamship   company  on  goods 
exported  which  are  of  special  value,  as  jewelry.     It  is  a  receipt 
by   virtue   of   which   the   shipping  company   assumes   a   special 
responsibility. 
Ton. 

Cargo.  40  cu.  ft. 
Freight.  40  cu.  ft. 
Long.  2,000  lbs. 
Measurement.  40  cu,  ft. 
Metric.  2,204.62  lbs. 
Register.     100  cu.  ft. 

Shipping.  2,240  lbs.  weight,  or  40  cu.  ft.  measurement 
(50  on  sailing  vessels).  Since  a  common  quotation  of  rates  by 
steamship  companies  is  weight  or  measurement  ton,  whichever 
costs  more,  and  since  measurement  ton  for  most  goods  nets  the 
companies  more,  the  measurement  ton  of  40  cubic  feet,  also 
called  the  freight  or  cargo  ton,  is  the  common  shipping  ton. 
Tonnage.     Number  of  tons  which  the  ship  measures. 

Displacement.     Weight   in   tons   of  the  volume   of  water 
displaced  by  the  ship  when  fully  loaded. 

Dead-Weight.    Weight  in  tons  of  cargo  that  can  be  carried. 
Gross  Registered.     Cubical  capacity  of  ship  in  register  tons. 
Net   Registered.     Cubical   capacity  available   for  carrying 
freight,  stated  in  register  tons. 


APPENDIX 


477 


Trust  Receipt.  Acknowledgment  by  consignee  who  has  imported 
under  a  letter  of  credit  that  the  bank  owns  the  goods,  which  he 
receives  without  paying  cash.  The  more  usual  procedure  under 
letters  of  credit  is  for  the  banker  to  retain  possession  of  goods 
in  his  go-down  until  the  consignee  arranges  a  sale. 

Underwriter.  One  who  underwrites,  that  is,  signs,  insurance  con- 
tracts. The  term  refers  to  individuals  rather  than  companies 
who  engage  in  insurance.    See  also  "Lloyds." 

W.  A.  "With  average,"  term  used  in  insurance,  same  as  "with 
particular  average,"  and  A.  A.  R.  Used  chiefly  for  textiles  and 
delicate  machinery.  It  requires  a  higher  rate  but  damage  need 
not  reach  a  particular  percentage  before  claim  is  allowed.  It  is 
therefore  opposed  to  F.  P.  A. 

Warranty.  An  undertaking  by  the  insured  that  some  particular 
thing  shall  or  shall  not  be  done,  or  that  some  condition  shall 
be  fulfilled. 

Without  Recourse.  Responsibility  disclaimed.  The  phrase  means 
that  the  drawer  or  an  indorser  of  a  bill  of  exchange  will  not  be 
liable  to  the  subsequent  holders  of  the  bill  in  the  event  of  its 
non-payment.  These  words  must  be  followed  by  the  signature 
of  the  drawer  or  the  indorser  of  the  bill,  who  will  be  held  liable, 
however,  if  any  signature  prior  to  his  own  prove  to  be  a  forgery. 

ZoLLVEREiN.  The  union  for  customs  purposes  of  the  separate  German 
states.  Not  important  after  the  formation  of  the  German  Empire 
in  1871. 


INDEX 


Abandonment,   296 
Abyss'nia 

regulations  for  travelers,  341 
Advertising,    247-255 
adapted  to  conditions,  248 
as   a  follow-up,   188 
channels   for,  248-253 
circularizing,   251 
exhibits,  252 
house   organs,   249 
local  agencies,  252 
local     magazines     and    papers, 

250 
posters,  253 
publications,   249 
specialists,  250 
distribution,  as  factor  of,  54 
information  needed,  253 
mail   order,   243-245 
methods  of   (See  subhead  above, 

"channels    for") 
place  of,  in   sales  plan,   188 
preparation   for   foreign,  254 
purpose  of,  247 
Advertising  expert 

exporter's   staff,   100 
Afghanistan 

regulations   for  travelers,  341 
Africa 
consular   requirements,   390 
shipping  requirements,  390 
Agency,  law  of,  324 
Aids  to  foreign  trade,  162 
Ail-American   Association,    131 
American    Asiatic   Association,    131 
American  Board  of  Foreign  Trade, 
164-168 
activities  of,   165 


functions  of,  167 
organization    of,    important,    166 
American    Chamber    of    Commerce 

for  the  Levant,  131 
American  consulates,  438-442 
American  embassies,  443 
American    Exporters'    and   Import- 
ers'  Association,    128,    129 
American     manufacturing     sj'Stem, 

267 
American     Manufacturers'     Export 

Association,   128,   129 
American-Polish    Chamber  of  Com- 
merce,  131 
American-Roumanian    Chamber    of 

Commerce,    131 
American-Russian       Chamber       of 

Commerce,   131 
Analysis  charts,  454-462 
Antigua,    regulations    for  travelers, 

350-352 
Appraiser,  264 
Arabia 
consular   requirements,   391 
regulations  for  travelers,  341 
shipping   requirements,    391 
Argentina 

consular    requirements,   391 
credit  customs,  404 
regulations  for  travelers,  341-343 
shipping  requirements,  391 
Asiatic  Association,  131 
Australia 

consular   requirements,   391 

credit   customs,   404 

market    for    American    exporter, 

68 
regulations  for  travelers,  344 
shipping  requirements,  391 


479 


48o 


INDEX 


Austria 

consular    requirements,    392 

credit  customs,  405 

regulations  for  travelers,  344 

shipping   requirements,   392 
Austria-Hungary 

commercial  policy,  78 
Averages,  297 


B 


Bahamas,  regulations  for  travelers, 

350-352 
Balance  of  trade,  40 
Balkan  States 

consular   requirements,   400 

credit  customs,  407 

shipping    requirements,    400 
Baltimore   Chamber   of   Commerce, 

130 
Bank  acceptance,   303,  307 
Banker's   draft,  303 
Banking    and   finance,    study   of    in 

foreign   trade,   216 
Bankruptcy  laws,  320 
Banks 

abroad,   established,  6^ 

assistance   of,    162 

course  in  foreign  trade,  217 

credit,  300,  310 

Federal    Reserve    Act,    313,    421- 

.423 

international  banking,  312 
machinery   of    foreign   trade,    113 
source   of   information,   27 
Barbados,    regulations    for    travel- 
ers, 350-352 
Bastable 

"Theory  of  International  Trade," 
58 
Bechuanaland,        regulations        for 

travelers,  350-352 
Beira,     regulations     for     travelers, 

346 
Belgian      Congo,     regulations     for 

travelers,  347 
Belgium 

consular   requirements,   392 
credit  customs,  405 


governmental  support  of  foreign 
trade,   161 

regulations  for  travelers,  346 

shipping    requirements,   392 
Bermuda,  regulations  for  travelers, 

350-352 
Bibliography,  463 
Bill  of  health,  261 
Bill  of   lading,   262,  278,  284 
Bills  of  exchange,  302 
Board    of    Foreign    Trade,    Ameri- 
can   (See  "American  Board  of 
Foreign  Trade") 
Boards  of  Trade,  source  of  infor- 
mation, 27 
Bolivia 

consular  requirements,  392 

credit  customs,  405 

regulations   for  travelers,  348 

shipping  requirements,  392 
Bond,  shipping  in,  290 
Bonding,  263 

Boston  Chamber  of  Commerce,  130 
Brazil 

consular    requirements,    392 

credit  customs,  406 

regulations  for  travelers,  349 

shipping  requirements,   392 
British     Guiana,     regulations     for 

travelers,   350-352 
British  Honduras 

credit   customs,    406 

regulations  for  travelers,  350-352 
British     possessions     and     protect- 
orates 

regulations  for  travelers,  350-352 
British    South    Africa,    credit    cus- 
toms, 406 
British  West  Indies 

credit  customs,  406 
Broker 

custom  house,   staff  of  importer, 
108-109 

drawback,   staff  of  importer,   109 

foreign  exchange,    114 

marine   insurance,  293 
Bulgaria 

credit    customs,   407 

regulations  for  travelers,  352 


INDEX 


481 


Bureau   of    Foreign   and   Domestic 

Commerce,   no,  338 
work  of,  423-429 
Business     technique,     study     of     in 

foreign  trade,  214 
Buyer,   resident,   staff  of  importer, 

108 


Canada 

consular    requirements,   393 

credit   customs,   407 

regulations  for  travelers,  353 

shipping  requirements,  393 
Capital,   8 
Ceylon,    regulations    for    travelers, 

350-352 
Chamber   of   Commerce 

American-Polish,   131 

American-Roumanian,  131 

American-Russian,   131 

Baltimore,   130 

Boston,   130 

Cleveland,    130 

Detroit,  130 

French,   131 

Italian,    131 

Japan,   131 

Levant,   for,   131 

Norwegian,    131 

Pacific  Coast  Associated,   130 

Pan-American,    131 

Pittsburgh,   130 

St.  Louis,   130 

San   Francisco,   130 

Spanish,   131 

Swedish,   131 

United    States,    129,    130 
Chart 

investigation,   20,   454-462 

of  demand,  34 
Chicago  Association  of  Commerce, 

129,   130 
Chile 

consular   requirements,   393 

credit  customs,  407 

regulations  for  travelers,  354 

shipping  requirements,  393 


China 

consular  requirements,  394 

credit  customs,  407 

market  for  American  exporter,  65 

regulations   for  travelers,  355 

shipping  requirements,  394 
C.  I.  F.,  325 
Civilizing  influences,  45 
Qearance,   288 
Cleveland   Chamber   of   Commerce, 

130 
Collections,     (See     also     "Credit") 

credits  and,  310-315 

machinery   of   foreign   trade,    113 
Colombia 

consular   requirements,   394 

credit  customs,  408 

regulations   for  travelers,  355 

shipping  requirements,  394 
Combinations 

abroad, 134 

industrial,  134 

Webb-Pomerene  law,   143 
Commerce 

comparative    needs    and    supplies, 
basis  of,  41 
Commerce  laws,  foreign,  316-325 

agency,  law  of,  324 

bankruptcy  laws,  320 

bookkeeping,   compulsory,  320 

commercial   codes,   317 

commercial  paper,  322 

commercial  travelers,  324 

elementary  knowledge  of,  316 

government   supervision,  321 

information,   source  of,  325 

miscellaneous  provisions,  319 

peculiar  trade  customs,  323 

registration,    318 
Commercial 

codes,  317 

geography,    study   of    in    foreign 
trade,  216 

law,  study  of  in  foreign  trade,  215 

paper,  322 

policies 

ancient  world,   71 
economic      thought,      develop- 
ment of,  70 


482 


INDEX 


Commercial — contimied 
policies — continued 

France,    77 

Germany,   77 

Great   Britain,  77 

laisscc-faire,  71 

mercantilism,  70 

protectionism,  72 

protective   tariff,   73 

types  of,  72 

United   States,  76 

world  powers,  70-79 
status, 

foreign   market,  52 
travelers 

documents   required  by,   339 

enemy   (former)    countries,  re- 
lations with,  340 

laws   for,  324 

license    fees,   338 

new    republics,    relations    with, 

340 
railroad  preferences,  340 
season   for  campaigns,  340 
regulations        for,        individual 

countries,  341-389 
samples,  admission  and  sale  of, 

339 
taxes,  338 

treaties  concerning,  338 
Commission     house,     export     (See 
"Export     commission     house") 
Commission   house,    local 
staff  of  importer,   106 
Comparative   costs 
application  of,  41 
conditions   of,  41 
definition  of,   58 

foreign    trade    result    of    differ- 
ences in,  45 
law  of,  41 
Compradore,  43 
Consular   invoice,  284 
Consular  service 
function  of,  119 

government    foreign    trade    ma- 
chinery,   119 
Consular    trade   requirements,    390- 

403 


Consuls 

American,  abroad,  438-442 
source  of  information,  24-27 

Co-operation 

future,  in  foreign  trade,   137 
value   of,    in    foreign   trade,    133- 

138 

without  combination,  136 
Co-operative 

export  organization,  93 
importer,    staff    of   importer,    108 
salesman,  exporter's  staff,  97 

sales  plan,   190 
Co-ordinating   Committee   on    For- 
eign Trade 

function  of,  123 

government    foreign    trade    ma- 
chinery, 123 
Corea 

regulations   for  travelers,  356 
Correspondent 

exporter's  staff,  95 
Costa   Rica 

regulations    for   travelers,    356 
Course  in   foreign  trade,  213-217 

banking  and  finance,  216 

business  technique,  214 

commercial    geography,   216 

commercial   law,  215 

economics,  214 

foreign   trade   machinery,  216 

foreign   trade  strategy,  215 

history,   216 

languages,  214 

practice,  217 

psychology,  216 

salesmanship,    215 

technology,  216 
Court  of  Customs  Appeals,  265 
Credit 

bank,  300,  310 

banking,    international,   312 

collections  and,  310-315 

discounting  drafts,  310,  312 

distribution,    and,   60 

Federal  Reserve  Act,  313 

finance  bills,   314 

foreign   customs,   404-414 

information,  311 


INDEX 


483 


Credit — continued 

mail  order,  245 

terms  of  sale,   12 

trust    receipts,   314 
Cuba 

consular    requirements,   395 

credit   customs,   408 

regulations   for  travelers,  357 

shipping   requirements,  395 
Curacao 

regulations  for  travelers,  357 
Currency  equivalents,  447-450 
Custom   house   broker 

staff  of  importer,   108 
Custom  house  procedure,  286-290 
Customs 

credit,   foreign,  404-414 
Cyprus 

regulations  for  travelers,  350-352 


Declaration,   262 
Demand 

and    supply    in    foreign    market, 
29-38 

chart  of,  34 

customer's,   267 

how  to  study,  33 

latent,  269 

potential,   32 

principles   of,   29 

qualitative   test  of,  31 

quantitative    test    of,   31 

reciprocal,  41 

relation    to    selling   campaign,    38 

relation   to   supply,   34 

tests  of,  30 
Denmark 

consular  requirements,  395 

credit   customs,   408 

regulations    for   travelers,   357 

shipping   requirements,   395 
Department  of  Commerce 

function  of,   120 

government    foreign    trade    ma- 
chinery, 120 
Deportment 

importance   of,   175 
Detroit  Chamber  of  Commerce,  130 


Development     of     foreign    market, 
171-180     (See     also     "Foreign 
market") 
Diplomatic   service 

controlled   by   State   Department, 
118 

government     foreign     trade     ma- 
chinery,  118 
Director  of  foreign  sales,  94 
Distances  to   foreign  ports,  445 
Distribution 

acquaintance  an  element  of,  62 

advertising,   54 

hanks    abroad,   63 

channels    of,    domestic,    55 
chart,    55 

channels   of,    foreign,   56 
chart,  56 

credit  and,  60 

factors   of,    54 

maximum    efforts,    results   of,   6i 

minimum    efforts,    results    of,    61 

mistaken    methods   of,   61 

prices  and,  60 

principles   of   international,  54-63 

storage,   54 

transportation,   54 
Dock  receipt,  284 
Documentary   drafts,  306 

required  by  travelers,  339 
Domestic  billing,  278 
Dominica,    regulations    for    travel- 
ers, 350-352 
Dominican   Republic 

regulations   for  travelers,  358 
Drafts,  303 

banker's,  303 

discounting,  310,  312 

documentary,  306 
Drawback,  288 

text  of  law,  420 
Dumping,  59 
Dutch   East  Indies 

regulations    for  travelers,  358 


East    Africa    Protectorate,    regula- 
tions for  travelers,  350-352 
Economic  status,  foreign  market,  49 


484 


INDEX 


Economics,  study  of,  course  in  for- 
eign   trade,   214 
Ecuador 
consular   requirements,   395 
credit   customs,   408 
regulations  for  travelers,  359 
shipping  requirements,   395 
Education    for    foreign    trade,    200- 
217 
American  methods,  203 

status   of,    204 
course    of    study,    213-217     (See 
also        "Course        in        foreign 
trade") 
European  methods,  200 
haphazard   methods,   207 
natural   qualifications,   206 
opportunities    for,   212 

colleges  and  universities,  203 
mail  courses,  205 
Y.  M.  C.  A.,  204-205,  212 
practical,  202,   205 
reason  for  many  failures,  207 
success,    requisites    for,   200 
technical,   201 
Efficiency     of     organization      (See 

"Organization") 
Eg>'pt 

consular  requirements,  396 
credit  customs,  409 
regulations  for  travelers,  359 
shipping  requirements,  396 
Embassies 

American,  443 
England    (See  also  "Great  Britain") 
government    support    of    foreign 

trade,   161 
market    for    American    exporter, 

64 

regulations   for  travelers,  387 

Entry  blanks,  262 
Equatorial   Africa 

regulations   for   travelers,   359 

Exchange 
international,    of  commodities,  103 

Export 

declaration,  286 
importer  for, 

staff  of  importer,    107 


invoices,    284 

manufacturing    for,   267-272 

marking    for,   276 

office,  as  training  school,  210 

packing   for,   273-276 

payments,      299-309      (See      also 

"Payment") 
railroad  transportation  of,  277 
shipper's    declaration,    286 
Export  agent,  92 
Export   commission  house,  90 
buying   agent,   91 
differentiated    from   export    mer- 
chant, 90 
Exporter 

classes  of,  89 
co-operative    export    organiza- 
tion, 93 
export  agent,  92 
export  commission  house,  90 
export  merchant,  92 
producer    for   export,   90 
Exporter's  staff,  89-100 
advertising   expert,   100 
co-operative    salesman,    97 
correspondent.  95 
director  of  foreign  sales,  94 
export   manager,   93 
foreign  trade  manager,   95 
local    selling    agent,    98 
manufacturer's    representative,  95 
shipping  clerk,  98 
traffic  manager,  99 
translators,   96 
Exporting 

technicalities  of,  273 
Export  manager 

exporter's  staff,  93 
Export  merchant,  92 
Export  office 

development    of    foreign    market, 
178 
Export   organization,    148-160 

advantages  of,  for  staple  articles, 

149,   150 
co-operative   sales,    IS3-I57 
disadvantages  of,   for  specialized 
articles,  148 


INDEX 


485 


Export  organization — continued 
district  sales  company,   159 
jointly  controlled,   151-155 
selling   combine,    156-158 
types     of      selling      organization, 

150-158 
Webb-Pomerene  law,  139-147 
advantages  afforded  by,  151,  160 
possible  types,   143 
Exports 

and   imports 

economic     difference     between, 

104 
legal  difference,  104 
relation   to   imports,    loi 
current    fallacies,    101 
Express,     machinery     of      foreign 

trade,    112 
Extract,     custom    house     manifest, 
287 

F 

Falkland    Islands,    regulations    for 

travelers,  350-352 
Federal  Reserve  Act,  313 

text  of  law,  421-423 
Federal   reserve  bank,   124 

function    of,    125 
Federal  Trade  Commission 
function  of,   122 

government     foreign     trade    ma- 
chinery,   121 
rules  of  practice,  433-437 
Webb-Pomerene    Law,    142 
Federated    Malay     States,     regula- 
tions   for   travelers,   350-352 
Fiji,  regulations  for  travelers,  350- 

352 
Finance  bills,  314 
Financial  status,  foreign  market,  50 
Financing    foreign    shipments,    299- 

309  (See  also  "Payment") 
Financing      import     shipments, 

methods  of,  308 
F.  o.  b.,  325 

Follow-up  methods,  186-189 
Foreign      commerce      laws       (See 

"Commerce   laws,   foreign") 
Foreign  exchange 
broker,   114 


values   of   foreign   coins,   447-450 
Foreign    market 
attitude  toward,   171 
commercial    status,   52 
development  of,    171-180 

co-operative,    180 

deportment,  175 

expense,    177,    179 

export   office,    178 

first  steps,   171,   172 

investigation   procedure,   173 

investigator,    173 

letters   of    introduction,    174 

obtaining  data,   176 

returns   from,    179 

time    required,    177 
economic  status,  49 
financial    status,    50 
governmental  status,  48 

political  and  legal  functions,  48 
international   and   domestic,   46 
legal  status,  48 
political    status,  46 
social   status,   51 
status   of,   46-53 
Foreign    sales    plan,    181-191     (See 

also  "Sales  plan") 
Foreign    service 

adaptability  for,  192 
age.  Importance  of,  197 
aptitude    for,    192 
elements  of  success  in,  192 
experience,   importance   of,   197 
personality,   importance  of,   195 
right  man  in   right  place,   196 
right   man,   selection   of,    196 
selecting  men   for,   192-199 
special   knowledge   for,    194 

economic  and  social  conditions, 
194 

languages,   194 

psychology  of   races,   194 
special   training   for,   194 
test   of   candidates    for,    198 
Foreign  trade    (See  also  "Machin- 
ery of   foreign  trade") 
education    for     (See    "Education 

for   foreign  trade") 


486 


INDEX 


Foreign  trade — continued 
future  of,   8o-8s 

economic  co-operation,  82 

individualism,  81 

socialism,   80 

sociological   aspects,   84 

standard  of   living,  81 

United   States,  82 
government     machinery,     1 16-127 

Department  of  Commerce,   120 
intermediaries  in,  55 

chart,   56 
manager,    exporter's   staff,   95 
promotion   of,   75 

kartels,  76 
publications.   III 
self-developing,    180 
specialists,    114 
State   Department,    116 
Foreign  Trade  Advisers,  work  of, 

429-433 
Foreign  Trade  Club  of  San  Fran- 
cisco,  130 
Forwarding    agents,    machinery    of 

foreign  trade,  113 
Fostoock,   43 
France 

commercial   policj^   77 

consular  requirements,  396 

credit   customs,   409 

governmental  support  of  foreign 
trade,  161 

market  for  American  exporter,  65 

regulations  for  travelers,  360 

shipping  requirements,  396 
Freight  rates,   112,  281 
French  Chamber  of  Commerce,  131 
Fundamental  factors,  8-14 

capital,  8 

information,   8 

methods   of    distribution,   9 

organization,    10 

poUcies,  general,    13 

terms    of    sale,    12 


Gambia,    regulations    for    travelers, 

350-352 
General   average,   291,   297 


Germany 

commercial   polIcj%   yj 
consular  requirements,  396 
credit  customs,  409 
government    support    of    foreign 

trade,   161 
regulations  for  travelers,  360-362 
shipping   requirements,    396 
Gibraltar,  regulations  for  travelers, 

350-352 
Glossary,   465-477 
Gold  Coast 

regulations  for  travelers,  350-352 
Government 
aids  to  foreign  trade,  83,  162 
Bureau    of    Foreign    and    Do- 
mestic   Commerce,   423-429 
Federal      Trade      Commission, 

433-437 
Foreign    Trade    Advisers,    429- 

433 
local,  source  of  information,  27 
machinery  of  foreign  trade,   116- 
127 

consular    service,    119 
Co-ordinating     Committee     on 

Foreign  Trade,   123 
Department  of   Commerce,  120 
diplomatic   service,   118 
federal    reserve   bank,    124 
Federal    Trade  Commission,  121 
Shipping  Board,   121 
State  Department,   116 
Tariff  Commission,  121 
support  of  foreign  trade,  161-168 
American     organization,     form 

of,   164 
American   possibilities,    162 
Belgium,   161 
England,    161 
France,  161 
Germany,   161 
Holland.   161 
why  needed,   163 
trade    investigation,    25 
Governmental    statistics,   23 
Governmental   status 
foreign  market.  48 
political  and  legal  functions,  48 


INDEX 


487 


Graduate   School   of   Business  Ad- 
ministration,   Harvard    Univer- 
sity, 203 
Great  Britain  (see  also  "England") 

commercial   policy,   "JJ 

consular    requirements,    396 

credit  customs,  414 

regulations    for   travelers,   387 

shipping  requirements,   396 
Greece 

consular   requirements,  397 

credit   customs,   410 

regulations  for  travelers,  362 

shipping  requirements,   397 
Greek  Association,    131 
Grenada,   regulations   for  travelers, 

350-352 
Guaranty  Trust  Co.,  foreign  trade 

bureau,   132 
Guatemala 

consular  regulations,  397 

credit  customs,  410 

regulations  for  travelers,  Z^2 

shipping    regulations,   397 


H 


Haiti 

consular    regulations,   397 

credit  customs,  410 

regulations    for   travelers,   2)^2) 

shipping   regulations,   397 
Harter   Act,  295,  325 
Hawaii,    regulations    for    travelers, 

364 
Histery,   study  of  in  foreign  trade, 

216 
Holland 

commercial   policy,   78 
consular    regulations,   397 
credit   customs,   411 
governmental   support  of   foreign 

trade,   161 
regulations   for  travelers,   373 
shipping   regulations,   397 
Hong  Kong,  regulations  for  travel- 
ers. 350-352 
Honduras 
consular  requirements,  398 


credit  customs,  410 
regulations  for  travelers,  364 
shipping   regulations,    398 
Hungary,  regulations  for  travelers, 
364 


Importer,   loi-iio 
co-operative,   108 
for   retail,    107 
improperly    so-called,    106 
proper,    105 
staff  of,   105 

broker,  custom  house,   108 

broker,  drawback,   109 

commission  house,   local,   106 

co-operative   importer,    108 

export-importer,   107 

importer  proper,    105 

manufacturer,  importing,   108 

resident  buyer,   108 

wholesale   distributer,   local,  107 
warehouse,  importance  of,  to,  109 
Importers,  classes  of,  260 
Importing 
bonding,  263 

classes  of  importers,  260 
domestic   procedure,   262 
entry  blanks,   262 
foreign   preliminaries,   261 
methods  of,  109 
storing,   263 
technicalities,    259-266 
undervaluation,  264 
Imports 
and  exports 

economic  differences,  104 

international  exchange  of  com- 
modities, 103 

legal  difference,  104 
relation   to   exports,    loi 

current  fallacies,   loi 
shipments,  financing,  308 
utility   of,    102 
Indebtedness,   international,   40 
India 
credit  customs,  410 


488 


INDEX 


India — continued 

market    for    American    exporter, 
68 

regulations  for  travelers,  366 
Indo-China 

regulations  for  travelers,  367 
Influences 

civilizing,  of  trade,  45 
Information 

advertising,  253 

books,  26 

collection  of,    17 

commerce  laws,  foreign,  325 

consular,  24 

credit,  311 

governmental   statistics,  23 

governmental  trade  investigation, 
25 

importance  of,  8 

miscellaneous   sources,  24 

pamphlets,  26 

personally    secured,    27 

sources    of,   23-28 

trade  meetings,   25 

trade     representatives'    investiga- 
tion, 26 
Insurance    (See    also    "Marine    in- 
surance") 

machinery   of    foreign   trade,    112 
Intermediaries,   foreign   trade,   55 

chart,   56 
International 

convention 

patent  laws,  331 
trade-mark,  328 

distribution,    principles    of,    54-63 

indebtedness,  40 

organizations,    130 

sales   manager,    191 

salesman    (See   "Salesman,   inter- 
national") 

trade,   civilizing  influences,  45 

values,    elementary  principles   of, 
58 
Investigation 

charting   results,  20 

governmental  trade,  25 

on  the  ground,  17 

psychology  of  market,  19 


structure  of  market,  IQ 
theoretical   knowledge,   20 
trade  representatives,  26 
Investigator 

analysis   charts,  453-462 
development   of    foreign   market, 

173 

expense  of,  177 

instruction  sheet,  454 

machinery  of   foreign  trade,   114 
Invoice,   262,   284 
Ireland 

credit  customs,  414 

regulations  for  travelers,  387 
Italian  Chamber  of  Commerce,  131 
Italy 

commercial  policy,  78 

consular    requirements,    398 

credit  customs,  410 

regulations    for   travelers,   367 

shipping  requirements,  398 


Jamaica 

regulations  for  travelers,  350-352 
Japan 

Association    for   North   Am&rica, 

131 

Chamber  of   Commerce,   131 
commercial  policy,  78 
consular  requirements,  398 
credit   customs,   411 
regulations  for  travelers,  367 
shipping  requirements,  398 
Jobber,   wholesale 

staff  of  importer,   107 

K 

Kartels,    76,    135 
Korea    (See   "Corea") 


Laisscc-fairc,  71 
Languages 

course   in   foreign   trade,  214 
Latent  demand,  269 


INDEX 


489 


Latin   America 

market    for    American    exporter, 

67 
Legal  status  of  foreign  market,  48 

Letters   of   introduction,    174 

Levant,  Chamber  of  Commerce  for, 

131 
Liberia,    regujations    for    travelers, 

368 
License  fees,  338 
Lloyds,  292 
Local 

organizations,    130 
representative,  mail  order  house, 

246 
selling  agent,   exporter's  staff,  98 


M 


Machinery  of   foreign   trade 

banks,   112 

chief    factors   of,    I11-115 

collections,   113 

consular   service,    119 

Co-ordinating   Committee,    123 

course  in,  216 

Department    of    Commerce,     120 

diplomatic  service,   118 

express,    112 

federal  reserve  bank,   124 

Federal    Trade    Commission,    121 

foreign  exchange  broker,   114 

foreign    trade   specialist,    1 14 

forwarding  agents,   113 

freight  rates,   112 

government,    1 16-127 

insurance   rates,   1 12 

investigator,   114 

parcel  post.   112 

publications,   III 

Shipping   Board,    122 

State  Department,   I16 

Tariff  Commission,   123 
Madagascar 

regulations   for  travelers,  368 
Alail   order,   241-246 

advertising,   243-245 

credit,  245 

dealer  and  the,  242 


delivery  by,  241 
house 

American,   241 
dealer  and  the,  242 
ordinary  type  of,  242 
local   representative,  246 
service,  245 
soliciting   by,   241 
Malay    States,    Federated,    regula- 
tions  for   travelers,   350-352 
Malta,     regulations     for    travelers, 

350-352 
Manifest,  shipping,  282 
Manufacturer,   importing,    108 
Manufacturer's    representative,    ex- 
porter's staff,  95 
Manufacturing 
details  of,  268 
for  export,  267-272 
system  in   America,   267 
Margraff,    quoted    on    foreign    ex- 
change    department     of     bank, 
315 
Marine  insurance,  291-298 
abandonment,  296 
agents,  293 
averages,   297 
important   features,  294 
liability  of   steamship   companies, 

295 
open   policy,  297 
origin   of,   292 

regulations,  fundamental,  292 
imderwriters,   292 
valued   policy,   297 
Market 
best  for  American  exporter,  64-69 

China,  65 

Latin   America,  67 

London,  64 

Paris,   65 

Russia,  66 
foreign 

commercial    status,   52 

development  of    (See  "Foreign 
market,    development    of") 

economic  status,  49 

financial  status,  50 

governmental  status,  48 


490 


INDEX 


Market — continued 
foreign — continued  '^ 
political   status,  46 
social  status,  51 
status  of.  46-53 
"new,"  defined,  65 
psychology  of,  43 
structure  of,  42 
Marking,   for  export,   276 
Mauritius,    regulations    for    travel- 
ers, 350-352 
Men   for   foreign   service,   selection 
of,  192-199  (See  also  "Foreign 
service") 
Mercantilism,   70 
fallacy  of,   71 
Merchants'     Association     of     New 

York,    129,   130 
Methods   of   distribution,  9 

Mexico 

consular   requirements,   398 

credit  customs,  411 

regulations  for  travelers,  369-372 

shipping  requirements,  398 
Montenegro,  regulations  for  travel- 
ers.  372 
Montserrat,   regulations  for  travel- 
ers,  350-352 
Morocco,  regulations  for  travelers, 

373 


N 


National   Association  of  Manufac- 
turers, 129 
National   City  Bank,   foreign  trade 

bureau,    132 
National    Foreign    Trade    Council, 

128 
National  organizations,  128 
Navigation   laws,   74 
Netherlands    (See  "Holland") 
New  countries 

consular  requirements,  403 
regulations   for   travelers,  340 
shipping   requirements,  403 
Newfoundland,       regulations       for 
travelers,  373 


New  Orleans  Association  of  Com- 
merce,  130 
New  York 

distances  from,   to   foreign  ports, 

445 
New  Zealand 

credit  customs,  404 

regulations  for  travelers,  374 
Nicaragua 

consular   requirements,  399 

credit  customs,  412 

regulations   for   travelers.   374 

shipping  requirements,   399 
Non-dumping   certificates,   285 
North      Borneo,      regulations      for 

travelers,  350-352 
Northern    Nigeria,    regulations    for 

travelers,   350-352 
Norway 

consular  requirements,  399 

credit   customs,  413 

regulations  for  travelers,  375 

shipping  requirements,  399 
Norwegian  Chamber  of  Commerce, 

131 
Nyasaland      Protectorate,      regula- 
tions for  travelers,  350-352 


Open  policy,  298 
Organization,  10 

efficiency  of,  218-224 

form  of,  219 

manager,  duty  of,  222-224 

policies  of,  general,  221 

principles   of,   218 

salesmen,    how    to    handle,    221, 
223.  224 

specialized    effort,    220 
Organizations 

international,   130 

local,   130 

national,   128 

private,   132 

public,   three   types  of,   128 
Overproduction,   35 


INDEX 


491 


Packing,   273-276 

general  considerations,  274 

instructions,   general,   275 

special   considerations,   274 
Panama 

consular  requirements,   399 

regulations  for  travelers,  376 

shipping  requirements,  399 
Panama     Canal     Zone,     regulations 

for  travelers,  376 
Pan-American    Chamber    of    Com- 
merce, 131 
Pan-American  Union,   130 
Paraguay 

consular  requirements,  399 

credit  customs,  412 

regulations   for   travelers,   376 

shipping  requirements,  399 
Parcel  post 

countries,   list  of   444 

machinery   of    foreign   trade,    112 
Particular   average,  297 
Patent  laws,  326-333 

importance  of,  331 

international  convention,  331 
Payment 

bank  acceptance,  307 

bills   of   exchange,   302 

cash  with  order,  299 

draft,  303 
bankers,   303 
documentary,    306 

methods  of  making,  299 

negotiable  instruments,  303 

open  accounts,   301 

promissory  note,  304 

trade  acceptance,  304 
Permanent  representative,  28 
Persia 

consular    requirements,    400 

regulations   for  travelers,  Z17 

shipping  requirements,  400 
Personality,  importance  of,  195 
Personnel,  men  for  foreign  service, 
192-199      (See     also     "Foreign 
service") 
Peru 

consular  requirements,  400 


credit  customs,  412 

regulations  for  travelers,  Z71 

shipping  requirements,  400 
Philadelphia    Association    of    Com- 
merce,   130 
Philadelphia    Commercial    Museum, 

128,    129 
Philippine    Islands,   regulations   for 

travelers,   378 
Pittsburgh 

Chamber  of  Commerce,  130 

Foreign    Trade    Commission,    130 
Plans,   formulation   of,  21 
Poland,    regulations    for    travelers, 

378 
Policies 

open,  297,  298 

valued,  297,  298 
Political   status 

foreign   market,  46 
international    and   domestic,   46 
Pomerene     (See    "Webb-Pomerene 

Law") 
Portugal 

consular  requirements,  400 

credit  customs,  412 

regulations   for  travelers,  379 

shipping  requirements,  400 
Practical    course    in    foreign    trade 
(See       "Course       in       foreign 
trade") 
Price 

and  quality,  yi^  271 

distribution,   and,  60 

fixing  the,   57 
Private   organizations,    132 
Producer,   for  export,  90 
Promissory  note,  304 
Promotion   of   foreign  trade 

organizations   for,    128-132 
Protectionism,  ^2 

zoUverein,  ^2 
Protective  tariff 

high,  7Z 

low,   -JZ 

moderate,    "jz 
Psychology 

basic  principles  of,  39 

course   in   foreign  trade,  216 


492 


INDEX 


Psychology — continued 

economic   forces,  42 

of  the  market,  19,  43 
foreign,  39-45 

poHtical   forces,  42 

reciprocity,   44 

social  forces,  42 
Publications 

Asia,  131 

channels    of    advertising,    248-253 

foreign  trade,    ill 

Tlie   Americas,   132 
Public    organizations,    three    types, 
128 


Quality,   and   price,   ;i7,   271 


Races,    temperament,    classification 

of,   51 
Rapprochement,  237 
Rates,  shipping,  280 
Reciprocal   demands,   41 
Reciprocity,  psychology  of,  44 
Registration 
commerce  law,  318 
trade-marks,  328 
not    subject   to,   329 
rules  regarding,  329 
Registry  of  deeds,  319 
Rcichsbank,   161,   164 
Resident   buyer,    staff   of   importer, 

108 
Retail,   importer  for,   107 
Rhodesia,  regulations  for  travelers, 

350-352 
Roumania 

consular  requirements,  400 
credit  customs,  412 
regulations  for  travelers,  379 
shipping  requirements,  400 
Russia 

commercial  policy,  78 
consular  requirements,  400 
credit  customs,  412 
market    for    American    exporter, 
66 


regulations   for   travelers,   380 
shipping  requirements,  400 


St.   Helena,   regulations   for  .travel- 
ers,  350-352 
St.   Louis    Chamber   of   Commerce, 

130 
St.  Lucia,  regulations  for  travelers, 

350-352 
St.  Vincent,  regulations  for  travel- 
ers, 350-352 _ 
Sales  manager,  international,   191 
Salesman,   international 
aggressiveness,  232 
approaching   a   prospect,    236 
art  of  being,  239 
closing  a  sale,  238 
excuses,    overcoming    customer's, 

234 

expenses  of,  177 

keeping  a  customer,  235 

methods  of  training,  200-217 
(See  also  "Education  for  for- 
eign  trade") 

offering   suggestions,  235 

opportunities  for  study,  203-205, 
212 

study  on  the  ground,  217 

suggestions  for,  232-240 

type  of  man,  232 
Sales  plan 

advertising,   188 

closing  sales  by  mail  order,  189 

concentration,  v.ide  range  of,  185 

co-operative,   190 

correlation  with  sales  organiza- 
tion,  183 

definition  of,   181 

elasticity  of,    183 

follow-up  methods,  186-188 

foreign,    181-191 

information   required,    182 

international    sales   manager,    191 

sources  of  information,  local,  185 

special  features,  184 
"Sales  talk,"  not   desirable  in   for- 
eign fields,   207,   208 


INDEX 


493 


Salvador 

consular    requirements,    401 

credit  customs,  413 

regulations  for  travelers,  380 

shipping   requirements,    401 
Samples,    admission    and    sale    of, 

339 
San   Domingo 
consular  requirements,  401 
credit  customs,  413 
regulations    for  travelers,  381 
shipping   requirements,  401 
San    Francisco    Chamber    of    Com- 
merce,  130 
Scandinavia,   commercial  policy,  78 
School  and  shop  method,  education 

for  foreign  trade,  211 
Schools  of  Commerce,  203 
Selection    of     men,     192-199     (See 

also  "Foreign  service") 
Selling  combine,  156-158 
Selling    expense,    means    of    reduc- 
ing, 150 
Selling  methods,  225-231 
adapting  to  country,  225 
approach  leisurely,  228 
classes  of,  229 
competitor's    methods,    study    of, 

230 
conforming  to  custom,  225 
suited   to   conditions,   227 
Selling  organization,    (See  "Export 

organization") 
Serbia 
consular  requirements,  401 
shipping   requirements,  401 
Seychelles,  regulations    for    travel- 
ers, 350-352 
Sherman  Act,  139 
Shipping 
arrangements  at  port,  280-285 
clearance,  288 
clerk,  98 

consular  requirements,  284 
drawback,  288 

financing  shipments,  299-309 
handling  freight,  regulations  for, 
282 


in   bond,   290 
"in  care  of,"  283 
insurance     (See    "Marine    insur- 
ance") 
interior,    from,    287 
liability  of   steamship  companies, 

295 

permit,  283 
rates,  281 
regulations,  foreign 

individual       countries      (alpha- 
betical   list),    390-403 
steamship      company,      choosing. 

280 
through  agent,  287 
"to  order,"  283 
Shipping   Board,    122 
Ship's  papers,  262  ' 

Siam 
credit   customs,   413 
regulations   for  travelers,   381 
Sierra      Leone,       regulations      for 

travelers,  350-352 
Social  status,  foreign  market,  42,  51 
South   Africa,   market    for   Ameri- 
can exporter,  68 
South    America,    commercial    poli- 
cies, 79 
Southern    Nigeria,    regulations    for 

travelers,  350-352 
Spain 
commercial   policy,    78 
consular  requirements,  401 
credit  customs,  413 
regulations   for  travelers,  382 
shipping  requirements,  401 
Spanish  Chamber  of  Commerce.  131 
Specialized    articles,    sale    of,    148, 

149 
Standard     Oil     Companies,      trust 

agreement,   133 
State  Department 
diplomatic  service,  control  of,  118 
machinery  of,    116 
Status  of  foreign  market,  46-53 
Storage,  263 

distribution   as   factor   of,   54 
Straits  Settlements,  regulations  for 
travelers,  350-352 


494 


INDEX 


Strategy-,  essentials  of,  15-22 

study  of,  215 
Structure   of    market,    19 
Sudan,      Anglo-Egyptian,      regula- 
tions for  travelers,  350-352 
Supply 

and    demand   in   foreign   market, 
29-38 

domestic,  36 

foreign,  36 

overproduction,   35 

relation   to   selling   campaign,   38 

tests  of,  34 
Surinam,   regulations  for  travelers, 

383 
Sweden 

consular  requirements,  402 

credit   customs,   413 

regulations   for  travelers,  383 

shipping  requirements,  402 
Swedish    Chamber    of    Commerce, 

131 

Switzerland 
consular  requirements,  402 
credit  customs,  413 
regulations   for   travelers,  384 
shipping  requirements,  402 


Tariff   Commissions,    121,    123 
Tariff  laws,  Zi^,  ^2,3 
purposes   for  which  levied,  333 
types  of,  332 
Taxes,  338 

Technicalities  of  exporting,  273 
Technicalities     of     importing     (See 

"Importing,    technicalities") 
Temperaments,   of   races,   51 
Trade  acceptance,  303,  304-306 
Trade  machinery 

exporter  and  staff,  89 
foreign   trade   auxiliaries,   89 
importer  and  staff,  89 
Trade-marks 
laws,  326-331 
classes  of,  326 

International    Convention,    reg- 
ulations, 327 


knowledge  of,  essential,  326 
registration  of,  328 
rules   regarding,   329 
what    may    not    be    registered, 
329 
Trade  meetings,  25 
Trade      representatives,     investiga- 
tions, 26 
Traffic  manager,  exporter's  staff,  99 
Training    for    foreign    trade    (See 
"Education  for  foreign  trade") 
Translators,   exporter's  staff,  96 
Transportation 

companies,  assistance  of,   162 
distribution,   factor  of,   54 
railroad,  277 
Travelers,  commercial    (See  "Com- 
mercial travelers") 
Treaties,    commercial,    338 
Trinidad,  regulations  for  travelers, 

350-352 
Trusts,  134 
American,    133 
beneficial   or  harmful,   134 
British   Corporation,    135 
combinations,    abroad,    134 
French,  135 

Italian-British     Corporation,     135 
Japan,  135 
kartcls,  135 
Michigan   Salt,    133 
New  Companies  Act,  135 

pipe,   133 
receipts,  313 
steel,   134 
whiskey,    133 
wire  nail,  133 
Tunis,     regulations     for    travelers, 

385 
Turkey 

consular  requirements,  402 
credit   customs,  413 
regulations    for   travelers,   385 
shipping  requirements,  402 


U 


Uganda,    regulations    for  travelers, 
350-352 


INDEX 


495 


Undervaluation  of  goods,  264 
Underwriters,  292 
Union  of  Soutli  Africa 

regulations  for  travelers,  386 
United  States 

Chamber  of  Commerce,   129 

commercial  policy,  'J^i 

credit  customs,  414 

foreign  trade,  future  of,  82 

importing,   methods  of,   109 

regulations  for  travelers,  388 
Uruguay 

consular  requirements,  402 

credit  customs,  414 

regtilations   for  travelers,  3C8 

shipping  requirements,  402 


Valued  policy,  298 

Values   of   foreign   money,   447-450 

Venezuela 

consular  requirements,  403 

credit  customs,  414 

regulations  for  travelers,  389 

shipping  requirements,  403 

w 

Warehouse,   importance   in   import- 
ing, 109 
Webb-Pomerene    Law,    139-147 
advantages,  146 


aid  to  foreign  trade,  145 
combinations  permitted,   143 
co-operative   selling  organization, 

153, 

America,  154 

England,    154 

example  of,   155 
district   sales   company,   159 
enactment  of,  139 
Federal        Trade        Commission, 

powers  under,   142 
joint  selling  organization,   151 

typical  plan,   152 
method   of  control,   142 
permissions  it  grants,  141,  144 
provision  of,   general,    140 
purpose  of,  139 
selling  combine,   156 

example  of,  157-159 
text  of,  417-419 
Weight   equivalents,   451 
Wholesale  jobber,    staff   of   impor- 
ter, 107 
World  powers,  commercial  policies 

of,  70-79 


Zanzibar,  regulations  for  travelers, 

350-352 
Zemstvos,  47 
Zollverein,  72 


This  book  is  DUE  on  the  last  date  stamped  below 


vi^U   o  '    1S30 
2  7  1932 


^^   1938 


OCT 


^  o  ,  - 


novi  19 


Form  L-9-10m-5,'28 


^ 


3  1158  00893  7194 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


AA    000  711  303    8 


►j,-. . 


•^LIFOI?!^: 


>  P  !    i  i  i    i    :  !    i  !    I 


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